Fed Policy Outlook: by this time next week
Fed Policy Outlook: by this time next week, there should be a new 2.0% to 2.25% funds rate band after the FOMC hikes by 25 bps. The tightening is all but a done deal. More crucial, however, will be the Fed's dot plot and the policy statement that includes forward guidance that will help set up expectations for the policy path over the rest of this year and for 2019. The FOMC's current dots are projecting another rate increase this year after the universally expected one next Wednesday, and three more next year. Analysts concur given the strength in the economy and the 2% inflation target that's generally been hit. Also in the spotlight will be the phrase "The stance of monetary policy remains accommodative," and whether it's removed. With the Fed already having removed a measurable amount of accommodation via rate hikes and QE unwinds, the removal could add an interesting, and possibly ambiguous twist, since it could suggest a less hawkish tilt. Hence, the Committee might decide to wait until the December meeting to provide the more ambiguous assessment. And, forecasting the FOMC in 2019 will become much more difficult given each meeting will be live, and as the neutral rate is an unknown. The 2019 voters will be a mix of hawks and doves with George, Rosengren, Evans, and Bullard, along with newcomers Clarida and Quarles.