Citi: The June Statement announced an unchanged policy status, as universally expected (unanimous

11-0 vote). The overall policy statement was also little changed from April with no surprises. The dot plot
median however showed two hikes implied by the end of 2023 median dots (6 upwardly revised dots).
Seven Committee members also expect a hike as soon as 2022, up from 4 from the March SEP. The
forecast for core PCE was revised up to 3.0% for 2021 (2.1% in 2022-23, implying a sustained
overshoot), while the unemployment rate was forecast at 4.5% in 2021, 3.8% in 2022, and 3.5% in 2023
from 4.5%, 3.9%, and 3.5% respectively. In the presser, Powell candidly noted that June was the “talking
about talking about [tapering] meeting”, saying that "at coming meetings", the Fed will assess progress
and depending on that progress at some point it "will be appropriate to announce a plan".
- FX: CitiFX Strategist says don’t stand in the way of the USD’s rally. “We calculate USD positioning to be
quite neutral at these levels. As such, we think that as fresh positions are added, this USD squeeze can
continue in the near term and would not stand in the way of it. USDJPY tends to be the most reactive to
moves in fixed income; but right here we think selling EURUSD on top of buying USDJPY makes sense,
as the shift by the Fed may elicit a more risk-off tone in markets this week.”

GS: In light of what we learned yesterday, GS have changed their forecast of the timing of the first hike to
2023Q3, from 2024Q1 previously. However, they see the odds of
a hike by the end of 2023 as only modestly better than 50% because liftoff could easily be derailed by
lower-than-expected inflation or a sharper deceleration in growth as fiscal support fades.

JP Morgan: The FOMC outcome was a fair bit more hawkish than expected. Most notably, the median
interest rate forecast “dot” for ’23 now shows 2 (rate) hikes, up from none in last projection in March."
Less surprising, but hawkish nonetheless, Chr Powell indicated FOMC has begun talking about when
tapering will begin, while he indicated they are “a ways away” from the “substantial further progress” goals
needed to actually start tapering, he also indicated econ. progress is being made, and tapering discussion
will continue in “upcoming meetings. He adds not only did median dot move up in ’23, but 13 out of 18
participants now expect a hike by then. The ’22 dots also shifted in hawkish direction, and 7 participants
now expect a hike by end of next yr, up from 4 in Mar (the median expectation in that yr is still no hikes).
The economic forecasts for ’22 and ’23 were very little changed relative to Mar."
- Feroli said on FOMC implementation developments, that both IOER and the O/N RRP rates were raised
by 5bp, to 15bp and 5bp, respectively, which was a small surprise.
- Money market rates have been very soft lately and changes in administered rates were intended to
foster trading of fed funds market well within the 0 to 25bp target range. The FOMC also extended
termination date of the dollar swap facilities with 9 central banks from Sept 30th to Dec. 31. It appears
that the FIMA facility is still set to expire at the end of Q3.