FOMC forecast revisions should be dovish, but
FOMC forecast revisions should be dovish, but maybe not as friendly as the markets hope. The estimates, to be released alongside the FOMC statement, should be mixed. And while they are likely to suggest a less aggressive rate stance in 2019 than this year, analysts believe the dots will still show a 2020 hike, which is not priced in and could bring in sellers in both bonds and stocks. As for the projections, analysts expect boosts in the 2018 GDP estimates to incorporate the emerging 3.2% climb, with potential additional hikes in low-end GDP growth forecasts for 2019. Analysts also expect big downward revisions in headline and core PCE chain price estimates for 2018 that incorporate both the November drop in oil prices and the recent weakening in reported core prices, with a likely trimming in the high-end estimates for 2019. The 2018 jobless rate estimates should converge on the likely 3.7% clip, and analysts don't foresee revisions to the forecasts for 2019 and beyond. The dot plot may toggle to showing two hikes in 2019 instead of three, which happens if at least two policymakers revise their expectations down to two hikes. Analysts still expect the estimates to show one hike in 2020, with only modest downside risk. The markets are not pricing in that. Analysts do expect growing Fed cautiousness as the prevailing rate enters the Fed’s range of "neutral" estimates in the face of falling oil prices and ongoing tariff threats. page for a table of our assumptions for the Fed's revised forecasts.