According to analysts at Rabobank, the minutes of the December 18-19 meeting clearly depicted the cautious tone of Fed speakers since the December meeting and the projection of two hikes in 2019 was made with this caution in mind.
Key Quotes
“The recent speeches do not reflect a change of course that took place after the FOMC meeting.”
“The FOMC is trying to acknowledge the concerns about the economic outlook in the markets and the business sector, but still the Committee thinks those concerns are about downside risks. In this sense, there is still some distance between the Fed and the markets. Therefore, we think that a final rate hike in March is still likely, before downside risks become the Fed’s baseline.”
“We think that the FOMC will take a pause after a final hike in March leads to an inversion of the yield curve. However, history teaches us that this is an early warning signal for a recession 12-18 months later.”
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