FOMC Preview - El-Erian, Goldman Sachs

El-Erian, chief economic advisor of Allianz, with six key highlights about the upcoming FOMC meeting, and Goldman Sachs anticipating a hawkish Fed.

El-Erian key points:

1. Fed officials are likely to shrug off the Q4 GDP headlines, and instead focus on the stronger internal figures - particularly investment and consumption

2. Global growth synchronisation and recent inflation dynamics (depreciation in the dollar also supports this outlook) will solidify the baseline guidance of three rate hikes this year

3. Market observers may see that the risk to the Fed's rate hike cycle as more to the upside, but the Fed will see those risks as balance on both sides (more hikes or less hikes) for the time being

4. There is not likely to be anything new or notable in relation to the Fed's balance sheet reduction plan

5. More attention will need to be given to the economic and market impact of the Fed's policies, especially those on other market valuations - as well as the ECB and BOJ policy changes - but the Fed will likely not publicise these matters in a notable fashion

6. Since it is Yellen's final meeting, she will likely receive lots of accolades from her colleagues and she has set in place a good platform for Powell to succeed as the next Fed chair

Goldman Sachs key quotes:

"We 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."

"A hike in March is 93% priced in but three hikes aren't yet fully priced in this year and a hawkish turn could signal more rate rises."