FOMC to raise actual and projected rate – Standard Chartered

According to analyst at Standard Chartered, the Federal Reserve is likely to raise the policy rate while they expect the rate dot plot to reflect four hikes in 2018.

Key Quotes:

“We expect the FOMC to increase the fed funds target range (FFTR) by another 25bps to 1.75-2.00% on 13 June, and adjust the interest rate on excess reserves (IOER) to 5bps below the upper bound of the FFTR.”

“We believe the median projected FFTR for 2018 will also rise (we expect an increase to 2.3%). Changes to the 2019 median remain a risk, although such changes face a higher hurdle than for 2018.”

“We believe a steeper FFTR path and a downgrade to cyclical unemployment rate is the most likely outcome.”

“We believe the June statement is likely to reflect the expected movement of policy towards (and ultimately above) neutral, which was already apparent in the March SEP. One way to achieve this would be to alter the phrase “the federal funds rate is likely to remain, for some time, below the levels that are expected to prevail in the longer run”, thereby acknowledging the policy rate’s progress to the neutral level.”