The Fed announcement is out! Salient features include the following, with the super-hawkish dot plot showing up as the main feature. Lower asset prices is an obvious response:
Dot plot: The 2023 median dot was higher -- a lot higher! Only five members had rates unchanged, and the median is now 0.625% -- higher than anyone was reasonably expecting.
Tapering: The statement retained the reference to substantial further progress
Forecasts: The unemployment rate was forecast at 4.5 in 2021, 3.8 in 2022, and 3.5 in 2023 from 4.5, 3.9, and 3.5 respectively. Core PCE was forecast at 3.0 in 2021, 2.1 in 2022 and 2.1 in 2023 from 2.2, 2.0, and 2.1. The big news here is probably the lower unemployment rate forecast next year, as the PCE forecast adjustment is basically a mark-to-market.
IOER: There was a five basis point hike to 0.15%
Here is a link to the side-by-side comparison to the statement made in April. Raising rates twice in the next 30 months is now considered a shocking development. That conclusion can only be reached if one believed they would never again attempt to normalize policy.Click HERE to subscribe to Fuller Treacy Money Back to top