The Fed gets more concerned: no rate hikes in 2019, earlier end of the balance sheet runoff

The Fed appears more concerned about the short and medium economic outlook, and stepped up the dovish attitude taken since the January meeting. The median number of appropriate rate hikes for this year has been slashed from two to none. 

Highlights:

  • In an acceleration of the dovish pivot undertaken since December, the Fed has marked down the growth and inflation outlook for this year and next.
  • Consequently it now envisages only one more rate increase, in 2020. The fed fund rate will then remain below its long term value for the next three years.
  • Moreover, the balance sheet Runoff will end by the end of September, a couple of months earlier than we expected; the pace of balance sheet reduction will slow down from May.

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THE FED GETS MORE CONCERNED: NO RATE HIKES IN 2019, EARLIER END OF THE BALANCE SHEET RUNOFF

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