Analysts at TD Securities explained how the Fed reintroduces (if at all) a balance of risk to the outlook is arguably a secondary concern to the evolution in the base case outlook for the economy.
Key Quotes:
"The Fed is expected to shave a tenth of a percentage point from 2016 growth to 2.3%. In addition to weaker global growth and an erosion in financial conditions, this revision reflects in part an upwards revision to 2015Q4 growth which raises the risk of a more negative swing in inventory investment weighing on Q1 (tracking stands at 2.3%).
A downwards revision of this magnitude is also consistent with the evolution of the year-ahead private sector consensus and will still leave the Fed a touch more optimistic than the market. This is a theme that will also be reflected in generally positive anticipated revisions to both the unemployment rate and core PCE inflation. The longer-term projections are not expected to be revised.
Beyond the adjustments to the macro projections, the evolution of the dot plot will garner far more attention. The relatively concentrated distribution of expectations in 2016 creates a very low bar for the median to shift lower, which in turns makes it likely that the 2017 and 2018 median dot will also move lower by 25bps."
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