Fed likely to hike in December and four more times in 2019 - RBC CM

Josh Nye, Senior Economist at RBC Capital Markets see little reason for FOMC members to slow the tightening cycle. They expect a rate hike in December and four more times in 2019.

Key Quotes:

“Today’s FOMC meeting was very straightforward—no rate hike and only minor tweaks to the policy statement. The Fed took note of lower unemployment over the last two months and slightly softer business investment in the Q3 GDP figures. But otherwise their assessment was familiar—strong economic activity and household spending, and inflation near 2%. Risks to the outlook remain “balanced,” and further, gradual rate increases are expected. That guidance has become synonymous with hikes at every other meeting, a pattern we expect will continue with a move in December and four more rate increases next year.”

“We see little reason for policymakers to slow the tightening cycle, even as fed funds gets closer to most estimates of the ‘neutral’ rate. With unemployment at its lowest in nearly 50 years and the economy still carrying decent momentum (growth over the last two quarters was the best in four years) we think inflation risks are tilted to the upside.”