Fed Hikes: New Dot Plot, Projections, Red Line, Analysis

Ok, start your engines ladies and gentlemen, it’s time for the main event (to mix sports metaphors).

Hopefully you’ve read all of the various Fed previews available here and everywhere else by now, because if not, it’s too damn late. But if you’re the type who likes to go back and compare what everyone was saying to what actually happened, there’s a quick rundown of Wall Street’s expectations here and a longer version here.

Obviously, you’re looking at the dots (three or four hikes?) and also at the statement to see whether the dovish forward guidance (i.e., “the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run”) is removed. Also, parse the presser for any clarity on the IOER tweak.

It’s always worth taking a second to assess how things have evolved since previous meetings, and in that regard, here’s the breakdown from Goldman on the econ front:

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DataSinceFed

As far as markets are concerned here’s the dollar:

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FedDXY

The dollar short has been trimmed as the greenback surged:

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USDshort

(Goldman)

10Y yields hovering below 3% after hitting their highest since 2011 several weeks back:

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10YYield

Reals:

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Reals

2s10s flattest since 2007 intraday on Wednesday (h/t Brian):

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2s10s

(BBG)

Spec short still massive:

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Specs

(BBG)

Oh, and notably, this:

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BadEMFX

And without further ado, here are the bullet point highlights, the dots, the projections, the redline and the statement.

  • Fed Raises Target Range For Benchmark Rate 25 Bps To 1.75%-2%
  • Fed: labor market continued to strengthen, job gains strong
  • Fed: economic activity rising at solid rate, unemployment fell
  • Fed: spending picked up, investment continued to grow strongly
  • Fed: longer-term inflation expectation gauges little changed
  • Fed: further gradual hikes consistent w/ 2% inflation, growth
  • Fed median estimate rises to four total 2018 rate hikes
  • Fed median shows funds rate at 2.4% end-2018, 3.1% end-2019
  • Fed median rate at 3.4% end-2020, long-run rate unch at 2.9%
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Disclosure: None of what I write here is to be construed as advice to buy or sell any kind of asset. It is merely my personal and not my professional opinion. Any asset can go to zero.

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