Fed path unchanged

Research Team at Societe Generale notes the Fed has raised federal funds target rate to 0.75-1%, but in a context of virtually unchanged economic projections, both in terms of the macro outlook and the path of the fed funds rates.

Key Quotes

“Indeed, Chair Yellen noted that the hike is not a reflection of a reassessment of the economic outlook. Instead, she flagged that the committee saw the economy progressing over the past several months exactly how it had anticipated. On the dual mandate, the Fed acknowledged progress toward its employment and inflation objectives: “Inflation has increased in recent quarters, moving close to the Committee’s 2 percent long-run objective”, although core inflation “continued to run somewhat below 2 percent” (core PCE was raised from 1.8% to 1.9% for 2017 in the summary of economic projections), and there is little change in market- and survey-based measures of inflation.”

“Risky assets cheered the ‘dovish hike’, as did Treasuries which rallied by up to 12bp with the belly of the curve leading the way. Significantly, the rates move is reflective of a dovish repricing of hike expectations with a second hike for 2017 only fully priced in at the September meeting, and a third hike priced in at 69%, just below the threshold at which the market starts showing some conviction (this versus June and December hikes fully priced in prior to the meeting).”

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.