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Fed Policy Outlook: the markets are fully priced for a December 14 hike

Fed Policy Outlook: the markets are fully priced for a December 14 hike, but key will be what's indicated for the policy trajectory in 2017. Analysts look for a relatively dovish stance to accompany the tightening. Note that the upcoming FOMC meeting includes the release of updated economic forecasts, along with the dot-plot, and a Yellen press conference. Analysts and most Fedwatchers are looking for two more tightenings next year, consistent with Fedspeak that's been stressing that moves will be gradual. However, policy actions will still be data dependent, yet it's still too early to predict the disposition of growth and inflation next year, and analysts doubt the FOMC will even try with respect to its updated forecasts. Hence, analysts look for a rather innocuous statement and little change to the forecasts, that will limit expectations for aggressive moves. Yellen is also likely to council patience. Additionally, the leaning of the new voters on the Committee is to the modestly dovish side, with Evans, Kashkari, Harker, and Kaplan coming on board, replacing the more hawkish George, Mester, Bullard, and Rosengren.


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