Far from being a complete nonevent, Goldman Sachs Group Inc. expects a slightly hawkish upgrade of language at the Federal Reserve meeting this week, slated to be Janet Yellenâs last.
âWe expect the FOMC to issue a generally upbeat post-meeting statement that includes an upgrade to the balance of risks and a slightly hawkish rewording of the inflation assessment,â Goldman economists led by Jan Hatzius wrote in a note dated Saturday. âTaken together, we believe the tone of the statement will be consistent with a hike at the March meeting, barring a sharp weakening in economic conditions.â
Inflation remains below target, but measures of it have firmed recently and âwe think many Committee members will view the core inflation rebound in recent months as additional evidence that last yearâs shortfall largely reflected temporary, idiosyncratic factors,â the report said.
The economists also see the risks to the economic outlook changed to âbalancedâ from âroughly balanced.â
âIn our view, the âroughly balancedâ verbiage in the December statement was already somewhat stale, particularly when viewed in the context of the minutesâ upbeat growth commentary and risk assessment,â they said. âPublic remarks since that meeting bolster the case for an upgrade, and by our count, at least half of the Committee has recently referenced upside risks to growth.â
However, they do expect at least one part of the statement to be unchanged: âWe expect the âclosely monitoringâ inflation language to remain,â they said.
