· We expect the Federal Reserve to hike the Fed Funds rate by 25 bps to the 2.00-2.25% range but the market focus will be primarily on the dot plot and the tone of the Fed Chair’s press conference.
· Given that growth remains robust, we expect the dot plot to show that another rate hike in December-2018 is a realistic possibility and expect an upward revision to the growth projections for 2018.
· While concerns about trade-wars could be expressed in the press conference, we don’t think that will show up in the FOMC’s forpost-policyn the post policy statement.
· The FOMC could also remove from or make an alteration to its policy statement that ‘policy remains accommodative’ to reflect that after this rate hike the real policy rate is expected to move into positive territory and as market derived real rates have moved higher.
· No substantial changes are expected in the forecasts or the dot plot for 2019-2020.
· The lack of any significant hawkish surprises could induce some near-term selling pressure on the USD against the DM FX block. However, USD strength against the EM FX block is likely to remain in place.
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