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Analysts at Deutsche Bank suggest that how markets fare today will likely depend on what sort of message we get from the Fed and Mr Powell this evening.

Key Quotes

“With a 25bp hike in the fed funds rate as good as done, the focus will instead be on the Committee’s signal about the prospects for rate hikes in the coming quarters.”

“DB’s Peter Hooper believes that although the market may interpret a few elements of the meeting dovishly, namely the possible change to the description of the policy stance as “accommodative” and a decline in the long-run median dot in the Summary of Economic Projections, he and the team would caution against this interpretation. Instead, Peter expects the overall message from the meeting to be that the current gradual (i.e. roughly quarterly) pace of rate hikes remains appropriate and that, with growth expected to continue to run well above potential, the labour market beyond full employment, inflation at target, and financial conditions still accommodative, the Committee has become more confident that rate hikes should continue at least to neutral.”

“Moreover, as Chair Powell has recently indicated, as long as income and job gains remain strong, a restrictive monetary policy stance could be needed. Peter goes on to say that this signal should reinforce elevated market pricing for the next rate hike in December and support expectations for further hikes at least through the first half of 2019. As a reminder, DB expects another 4 rate hikes in 2019 in addition to another this December.”