FOMC Minutes Signal "Patient" Fed And Dovish Sentiment: "Downside Risks Increased"

As a reminder, the FOMC raised the fed funds rate target by 25bps in December, in line with the analyst median forecast.

The central bank also narrowed the trajectory of rate hikes going forward, now envisaging two hikes in 2019, and one in 2020 (previously it had seen three hikes in 2019 and one in 2020). Crucially, the FOMC lowered its estimate of the neutral rate (to 2.8% from 3.0%), and additionally, the central bank softened its guidance on future rate hikes, saying that “some further gradual increases” to rates (versus the previous “further gradual increases”), even as the market continues to expect that the Fed's rate hike cycle is now over and even expects a rate cut in 2020. In terms of risks to the outlook, the Fed continues to see these as “roughly balanced”.

(Click on image to enlarge)

But the market is entirely rejecting The Fed's messaging and today's Minutes may hold some color for just how hawkish or dovish The Fed really is... 

(Click on image to enlarge)

And, since The Fed hiked rates in December, stock markets have turmoiled back to unchanged. However, one look at the chart below shows that it was in fact only stocks that were chaotic - the trend higher in bonds and bullion (and lower in the dollar) was relatively smooth...

(Click on image to enlarge)

And at the same time as stocks have yo-yo'd so have the market's expectations for just how dovish The Fed will be this year...

(Click on image to enlarge)

In fact, the last week has seen almost all dovishness priced OUT from 2019.

And so all eyes are on the Minutes to see if the "not dovish enough" sentiment within the statement was watered down from a more (or less) dovish perspective in the actual meetings...

It seems the dovishness was deeper in the meeting:

  • *FED OFFICIALS SAW EXTENT, TIMING OF FUTURE HIKES AS LESS CLEAR
  • *MANY OFFICIALS FELT FED COULD BE PATIENT ON FURTHER RATE HIKES
  • *FED: A FEW OFFICIALS FAVORED NO RATE INCREASE AT DEC. MEETING
  • *FED: SOME OFFICIALS NOTED DOWNSIDE RISKS MAY HAVE INCREASED
1 2 3
View single page >> |

Disclosure: Copyright ©2009-2018 ZeroHedge.com/ABC Media, LTD; All Rights Reserved. Zero Hedge is intended for Mature Audiences. Familiarize yourself with our legal and use policies every time ...

more
How did you like this article? Let us know so we can better customize your reading experience. Users' ratings are only visible to themselves.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.