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Powell Pops His Cherry: Raises By 25bps, Signals More Hawkish Rate Trajectory

by Tyler Durden
Wed, 03/21/2018 - 14:06


Stocks and bond yields are higher ahead of today's historic first-non-economist-run FOMC meeting as anxious eyes were focused on how hawkish or dovish Powell's fully-priced-in rate-hike would be.

Headlines:

*FED RAISES RATES QUARTER POINT, SIGNALS TWO MORE HIKES IN 2018
*FED ESTIMATES SHOW STEEPER PATH FOR RATE INCREASES IN 2019-20
*FED SAYS `ECONOMIC OUTLOOK HAS STRENGTHENED IN RECENT MONTHS'

They replaced "solid rate" with "moderate rate"

The Key Issues heading in were as follows...

Will there be 3 or 4 hikes for 2018 and whether 2019 will shift to a more hawkish 3 (all derived from the dot plot)?

Will economic projections be upgraded? (Likely mostly GDP and the unemployment rate, not inflation.)

Does The Fed hint at faster pace of tightening in outer years? (or are we already near the terminal rate)

And the answers...

The 2018 median was 2.125% for the December 2017 dot plot. For this rate to increase 25bp, four of the dots at or below the median would have to shift to 2.375%.

3 hikes (total including today) for 2018...2018 2.125% (range 1.625% to 2.625%); prior 2.125%



And the answers...

Fed estimates show steeper path for rate increases in 2019-20

Fed median 2018 gdp growth est. rises to 2.7% vs 2.5% dec. est.

Fed sees u.s. unemployment at 3.8% in 4q 2018 vs 3.9% dec. est.

Fed median 2018 est. for core pce inflation unchanged at 1.9%






3 hikes (total including today) for 2018...2018 2.125% (range 1.625% to 2.625%); prior 2.125%





3 hikes for 2019 (up from 2) - 2019 2.875% (range 1.625% to 3.875%); prior 2.688%




2 hikes for 2020 (up from 1) - 2020 3.375% (range 1.625% to 4.875%); prior 3.063%



Longer Run 2.875% (range 2.250% to 3.500%); prior 2.75%





With regard the economic projections, Bloomberg reminds readers that when Fed officials last published forecasts, after their December meeting, they still didn't have the full details on the contours of the tax legislation that would be passed later in the month. They also didn't know about the bigger-than-expected spending package that came in February.

......continues here

https://www.zerohedge.com/news/2018-03-21/powell-pops-his-cherry-raises-25bps-signals-more-hawkish-rate-trajectory