Fed may disappoint markets expecting a dovish tilt, helping the dollar – MUFG

The market expects the FOMC to give some clear guidance that it is ready to ease the pace of monetary tightening. Nonetheless, economists at MUFG Bank are not so sure Chair Powell will be willing to provide explicit guidance.

Powell may not meet market expectations

“But will Fed Chair Powell be willing to provide explicit guidance? We think that will be difficult to do. While the FOMC may be willing to suggest a slowdown in the pace of tightening, there is likely to be limited guidance on a pause and the message is likely to be the Fed needs to keep going until there is clearer evidence of actual underlying inflation pressures coming down.”

“With the labour market showing limited signs of softening (job openings rebounded in September), the Fed may be compelled to disappoint those expecting a dovish tilt this evening which should help provide the dollar with renewed support.”

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