Fed: dovish long-term - Deutsche Bank
|Analysts at Deutsche Bank explained that the takeaways from the dot plot were near-term hawkish, long-term dovish.
Key Quotes:
"The median expectations for rate hikes remained at one more in 2017 and three hikes in 2018, as we expected.
Perhaps more importantly, only four members still expect to not raise rates again this year, consistent with the June expectations.
We had anticipated that at least one member would fall from the median dot. The conviction around three rate hikes in 2018 also did not waver much – five
members were below the median in September versus four in June – even though two members now believe that no additional rate hikes are appropriate through 2018 (we suspect that Kashkari joined Bullard).
The hawkish message is therefore that the Committee’s expectations remain firmly around one more rate hike this year and three in 2018.
However, the messaging for long-term policy was on balance dovish. The median long-term dot fell from 3% to 2.75% in September, and 2019 median expectations
fell from 2.9% to 2.7%. The initial median expectation for 2020 was 2.9%. While some migration lower in long-run fed funds expectations was expected, we were surprised by the degree. Five members now see the long-term fed funds rate at or below 2.5%, versus only one in June."
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