Fed funds futures are lower
Fed funds futures are lower though the declines are more a function of the selloff in Treasuries than any major change in Fed expectations. However, there's a rather wide gap between the Fed's dot plot showing three hikes next year, and implied rates showing only one an about 50-50 odds for a second. How this split works out will be an important key for market direction in 2018 -- does the FOMC trim its dots at its upcoming meeting, or does the market see increased risk for more hikes. For now, a Powell-led FOMC should be a continuation of gradualist posture in place currently, at least for the near term. Trump's appointments to the Board of Governors are expected to be of a more conservative bent, but that's not likely to result in a significantly hawkish shift as soon as 2018. Of course how inflation plays out will be crucial for central bank policies. Most central bankers still work in a Phillips Curve world and the signs of improved growth will keep policymakers on the alert for price pressures.