FOMC: The Lady or the Tightener?

We say no "liftoff" at the FOMC on Thursday. Markets don't expect it, and the Fed's failure to correct expect ations ratifies them. Core inflation is low and falling, and there remains much slack in labor markets. Widening credit spreads and other factors have already tightened financial conditions, and the Fed is hesitant to have to debut new policy tools. Speculation about "liftoff" is rampant, perhaps largely because of what a terrible policy error it might be. The Fed allows the uncertainty to continue to keep a lid on financial excesses, so we would expect little new guidance in Thursday's FOMC statement.