US: Fed’s presents Goldilocks outlook - ING
|Viraj Patel, Research Analyst at ING, points out that the FOMC unanimously decided to raise the Fed funds rate by 25bps which signalled a fairly Goldilocks outlook for the US economy - that is one of stronger economic growth in the near-term, contained inflation and gradual rate increases.
Key Quotes
“We noted 3 interesting takeaways from Fed’s latest projections: (1) the committee is evenly split between 3 and 4 rate hikes in 2018 – meaning that even if the dial has tilted slightly towards the latter, getting a consensus within the FOMC (and the reality of 4 hikes) is still a distant of prospect and highly dependent on evolving macro data; (2) the Fed’s symmetric inflation mandate – and tolerance for slightly above-target inflation – is now formally noted in the 2019 core PCE inflation median estimate at 2.1%; and (3) the forecasts do not incorporate any downside risks stemming from US trade policy – which lends itself to a somewhat rosier outlook than what may actually prevail and may cause investors to discount the Fed’s signalled policy path.”
“While these Fed signals may have kept the ‘Goldilocks’ sentiment in place for now, we note that there is still a ‘Big Bad Wolf’ – in the form of a global trade war – lurking around the corner for markets. Indeed, the attention now shifts to Washington – with President Trump set to announce tariffs on Chinese imports by invoking Section 301 (reports suggesting around $50bn tariffs).”
“Under a ‘Cold Trade War’ scenario – and in the absence of an escalation of a broadening of US tariffs to other sectors and countries – we think tit-for-tat protectionist measures is unlikely to materially dent global risk sentiment, giving rise to what we label as a ‘nervous Goldilocks’ environment.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.