Fed Policy Outlook: analysts expect the FOMC to hike rates 25 bps next week
Fed Policy Outlook: analysts expect the FOMC to hike rates 25 bps next week, though risks have faded with the market now pricing in about 70+% versus 90% several weeks ago. And some Fedwatchers now see the Fed on hold a week from Wednesday resulting from signs of slowing growth, easing in inflation expectations, and market volatlity. Analysts don't expect the Fed to pause as soon as next week, however. Also of major importance is the 2019 rate trajectory, where analysts're expecting the Fed to lower its dot plot to two tightenings in 2019, down from three. And analysts continue to expect a move at the March 20 FOMC. But the market has significantly cut the chances for a hike in the first half of next year, and shows only modest probability for a hike at all. Analysts believe that's severely underestimating the policy path. Analysts acknowledge the Fed will turn more cautious next year as they pause from the quarterly tightenings seen this year, to assess the lagged effects of their actions, amid some slowing growth and moderated inflation expectations, especially with the plunge in oil prices. However, the expected December rate hike to the 2.25%-2.50% range only will take the rate to the low-end of the Fed's estimates of "neutral," leaving us two rate hikes shy of the 3.0% midpoint of official Fed estimates.