A few excerpts from a research piece by Merrill Lynch economist Michael Hanson: The not-so-dovish hike
With the market pricing in a better than 90% chance the Fed will hike at its December meeting, liftoff expectations are very different than in September. However, it is déjà vu all over again for talk of a “dovish hike” thereafter. We do not expect the Fed will be find the right mix of language, projections, dots and press conference remarks that ratifies current market expectations of a little more than two hikes next year — particularly when the Fed views four as “gradual.” The overall message from the December meeting is likely to be dovish, but probably less than the market hopes. …
The challenge for Yellen will be to find the right balance between “gradual” and “data dependent.” … the Fed does not want to suggest that it will pre-commit to any particular policy path. Several Fed officials have noted that “gradual” is a forecast, not a promise. As long as the data behave largely in line with the FOMC’s projections, a gradual pace of rate hikes is likely. But Yellen’s ability to explain this nuance to a market that would like a clear sign that the Fed is going to go even more slowly in 2016 may well be tested.
From CR: It seems that the Fed will raise rates next week. For 2016, several key analysts are forecasting 4 rate hikes (every other meeting), however the market is only pricing in about 2 rate hikes in 2016.