Fed: Plotting the dots – ANZ

Analysts at ANZ note that there was no change in the fed funds rate, though markets showed a hawkish reaction.

Key Quotes

“Balance sheet reduction has been coming for some time but it’s now moving into autopilot mode. We’ve all known about it, but it’s now black and white and set to start next month. The Fed still sees one more rate increase this year and three next year. The median dot plot was unchanged for 2017 (1.4%) and 2018 (2.1%) but 0.2%pts lower in 2019 (2.7%). The longer term central tendency was also lower, falling from 3.0% to 2.75%.”

“The wording was generally more upbeat; and the Fed is vowing to look through Hurricane Irma, noting that “Storm-related disruptions and rebuilding will affect economic activity in the near term, but past experience suggests that the storms are unlikely to materially alter the course of the national economy over the medium term.” The overall message is clear; it is getting on with the job at hand. Markets were thinking recent softness in core inflation could persuade the Fed to hold off hiking this year. It hasn’t.”