Fed’s median long term policy expectation has fallen - Westpac

FOMC’s balance sheet tapering was accompanied by less change in their projections than markets anticipated, according to Tim Riddell, Research Analyst at Westpac.

Key Quotes

“Plots clustered in 2018 and were more scattered in 2019 but the path was unchanged, even if the terminal rate is slightly lower for Fed Funds. Growth for 2018 was actually lifted and Yellen’s press conference made it clear that the Fed continues to expect inflation to push higher soon and that they need to avoid any runaway that could lead to excessive moves later on. This leaves December as still a live option.”

“Data dependency remains and hurricane distortion was noted. Market attention is likely to be on the next NFP as well as inflation releases. Any developments in Trump’s tax overhaul will also be a key driver of USD Q4.”

“FOMC has reduced a USD negative and suggests further gains into month end.”