FXStreet (Delhi) – Research Team at ANZ, notes that as expected, the FOMC raised the target for fed funds by 25 bps to 25-50bps and the beginning of normalisation reflects confidence in the economy’s recovery and a belief that it will be able to withstand a gradual increase in interest rates going forward.
Key Quotes
“The median dot point for 2016 was unchanged at a fed funds rate of 1.4%, although there was a narrowing in the range of dot points. The dot points imply four hikes next year.”
“For 2017, the FOMC cut the dot point projection for median fed funds to 2.4% vs 2.6%, taking out one hike that year. The 2017 GDP forecast was left unchanged at 2.2%, still above trend (2.0%). The median projection for the 2018 fed funds projection was reduced 10 bps to 3.3% and the long run rate was left unchanged at 3.5%.”
“On inflation, the FOMC expects inflation to rise to 2% over the medium term as the transitory effects of declines in energy and import prices dissipate and the labour market strengthens further.”
“The statement clearly pointed out that the decision to raise interest rates reflected the fact that it takes time for monetary policy to feed through to the economy.”
“In the statement, the Fed did note that it takes the international environment into account. Interestingly, it did not mention the strength in the dollar. It seems the sees that as transitory too.”
(Market News Provided by FXstreet)