Daily Commentary BY THE CURVE TEAM –

FOMC to Keep on Keeping On

27th of September, 2018

The highly anticipated meeting from the FOMC has come and gone and it provided plenty of talking points. The wash up is that the FOMC is set to keep on keeping on with further normalisation ahead despite some uncertainty caused by the announcement overnight.

FOMC Chairman Powell caused quite a stir last night when the statement  accompanying the decision to hike rates dropped the word ‘accommodative’. It got the market a little excited as it was read dovishly by the market. As a result the USD fell and equities jumped directly after the decision.

Those moves were soon unwound after Powell fronted the press conference and confirmed that the FOMC’s path is largely unchanged and there was no hidden meaning to the exclusion of the word accommodative.

The updated dot plots continue to point to further hikes ahead. December now looks almost a certainty unless we get an unexpected deterioration in the data. Three more look to be slated for 2019 but the range of the dot plot suggests that it could just as likely be two or four depending on the data.

It is the data that remains key for the FOMC. Powell is in no rush to commit to any premeditated path for the normalisation of monetary policy and will leave it up to the data and how the economy evolves.

David Flanagan

Director - Interest Rate Markets