FXStreet (Barcelona) – The economic forecasts by the FOMC suggests the GDP growth outlook still remains unchanged from its firming trend, and a Fed rate hike in September is likely, according to Economists at Wells Fargo Securities.
Key Quotes
“With no major surprises in the policy statement, focus went squarely to the Fed’s updated economic outlook and rate forecast. As expected given the soft start to the year, the Fed downgraded 2015 GDP growth to a central tendency of 1.8-2.0 percent from its previously downgraded forecast of 2.3-2.7 percent (our call is 2.0 percent). More relevant in our opinion, the GDP growth outlook for 2016 and 2017 was little changed from its firming trend.”
“Despite modestly raising its 2015 unemployment rate projection, Fed members largely kept their 2016-2017 inflation and unemployment rate projections intact.”
“The expected path of interest rates, as measured by the dot-plot chart, moved lower, compared to the March outlook. Two 25 bps moves are still implied this year, but the median year-end projection for 2016 has come down from 1.88 percent to 1.63 percent.”
“While the Fed remains cautious, today’s policy statement and outlook suggest that the U.S. economy has solid underlying momentum and is strong enough to withstand the first rate hike in nine years in the not-toodistant future. Admittedly depressed today, consumer inflation is poised to increase substantially in 2016, in part, on reduced labor market slack and low base effects.”
“We suspect the Fed may be starting to think inflation pressures will be harder to contain going forward and, as such, a rate move in September is still looking like a probable outcome.”
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