Bank of America previews Fed's October decision press conference: Q&A session may be skipped, Warsh will strive to 'play both sides'

October 27 - In response to the upcoming Federal Reserve interest rate meeting, Bank of America released a forecast stating that it expects Chairman Warsh's October press conference to continue the brief format of September, lasting about 30 minutes and possibly without a Q&A session.

Bank of America believes that if the Fed chooses to raise rates, Warsh's communication pressure will be relatively low, and he only needs to emphasize that inflation remains high and broad-based, financial conditions are not tight enough, and the economy and labor market remain strong. His core task is to avoid appearing too hawkish and prevent rate hikes from causing excessive tightening of financial conditions.

If rates are held steady, Warsh needs to make every effort to prevent market doubts about the Fed's credibility. In the face of strong September inflation data, even if explained by focusing on trends rather than a single data point, it would be difficult to shake off suspicions of inflation complacency, because it was precisely similar trends previously that led to the September rate hike. If Warsh is unwilling to lock in a December rate hike by guiding a quarterly pace of increases, the market may repeat the distortion and steepening of the yield curve, a weakening dollar, and a sell-off in risk assets.

Finally, Bank of America maintains its judgment that "the Fed will raise rates in December 2026 and March 2027 respectively"; at the same time, it emphasizes that if inflation stickiness in the first half of 2027 exceeds expectations, further rate hikes may not even be ruled out afterward.