The FOMC raised the target range for the policy rate to 1.75-2% at its June meeting today. The statement and projections were hawkish relative to market expectations: the Committee pulled forward its rate hike projections to show a 4-3-1 baseline over 2018-2020 (from 3-3-2 in March), upgraded its description of the economy, projected core inflation at 2% by year-end, continued to characterize the policy stance as accommodative, and made no mention of foreign concerns.
In his press conference, Chairman Powell downplayed several dovish arguments that are popular among investors, including concerns about taking the funds rate beyond neutral, an inverted yield curve, and the effects of trade tensions. Powell also announced that he will begin holding a press conference after every FOMC meeting in January.
As US PCE rises steadily ,we continue to expect 4 rate hikes in total in 2018 and 4 more in 2019 , with the risks skewed to the upside. Our subjective odds of a hike at the September meeting are 85%.
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