Duy: "Expect the Fed to Stand By Its 2018 Outlook" - InvestingChannel

Duy: “Expect the Fed to Stand By Its 2018 Outlook”

From Tim Duy at Bloomberg: Expect the Fed to Stand By Its 2018 Outlook. A few excerpts:

The Fed is likely to continue to point toward another 75 basis points of tightening in 2018 when it releases the next Summary of Economic Projections. To be sure, the minutes of the last FOMC meeting painted a dovish outlook as participants fretted about the inflation picture. But these concerns need to be weighed against the outlook for growth, which improved throughout 2017, and the implications of that accelerated growth on unemployment.

I anticipate the Fed will largely retain the policy rate forecast for 2018. This may come as a surprise given the dovish Fed minutes, but the recent surge in short-term rates indicates that financial markets are waking up to the reality that solid economic growth will prompt the bank to keep hiking rates despite low inflation. All else equal, the stage will be set for an inversion of the yield curve by the end of next year.

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