Thursday, March 17, 2016

Fed watch

Fed watch: Dovish estimates as Fed sees global cross currents
At yesterday’s FOMC meeting, the central bank left its fed funds rate unchanged as it sees risk in the global economic and financial markets.

The guidance is now for two interest rate hikes this year, revised down from the previous expectation of four rate increases. Maybank KE expects only one rate adjustment this year, in 2H16.

Meanwhile, the markets see a 38% probability that the next rate hike will be in Jun, and this rises to 53% in Sep.

Overall, the Fed sees that the slower path of policy tightening and it has also downgraded its forecasts for 2016-18.

Real GDP growth is now projected at 2.2% (previous: 2.4%) for 2016, 2.1% (previous: 2.2%) in 2017 and 2.0% (unch) in 2018.

Revised targets for fed funds rate:
2016: 0.9% (prior: 1.4%)
2017: 1.9% (prior: 2.4%)
2018: 3.0% (prior: 3.3%)

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