December FOMC: Committee fails to blink – Standard Chartered
Sonia Meskin, US Economist at Standard Chartered, points out that the FOMC raised the federal funds target range (FFTR) by 25bps to 2.50% and the interest rate on excess reserves (IOER) by 20bps to 2.40% at its 19 December meeting.
“It downgraded the median forecast for the number of hikes in 2019 in the Summary of Economic Projections (SEP) from three to two, amended the statement to indicate that “some” rather than “further” gradual increases remain appropriate, and struck a fairly optimistic tone in the statement and the press conference.”
“Chair Powell acknowledged tighter financial conditions over the last month, but noted that one hike fewer next year should help mitigate this. Consequently, the median real GDP, unemployment and core PCE forecasts saw only marginal downgrades in the December SEP.”
“We see the Committee as mostly concerned about global growth headwinds at this juncture, but still optimistic on the US economy. The Committee appears uncertain to what degree recent market price action has been caused by market positioning versus fundamental concerns, and, if the latter, how accurately these reflect fundamental risks.”