FOMC reactions: Balance sheet in September, hike in December

The Fed raised interest rates and sounded optimistic on the economy and on inflation. The US dollar had room to run. What’s next for the central bank? Here are two opinions about the next two big meetings this year:

Here is their view, courtesy of eFXnews:

June FOMC: Balance Sheet Runoff In September, Another Hike In December – Barclays

Barclays Capital Research comments on the outcome of the June FOMC meeting in which the Fed increased the target range for the federal funds rate 25bp, to 1.0 ­1.25%, and released updated policy normalization principles and plans, including the operational details on reducing securities holdings.

“We maintain our view that the Fed will announce balance sheet runoff at the September meeting and increase the federal funds target another 25bp in December.

….We believe it is very committed to balance sheet runoff this year and, in our view, there is a high bar to altering the Fed’s plans for its balance sheet at this point.  In other words, it’s full steam ahead,” Braclays argues.

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June FOMC: Balance Sheet Policy Change In September, Next Hike In December – BofAML

Bank of America Merrill Lynch Research comments on the outcome of the June FOMC meeting noticing that  Fed officials were clear in expressing that there is a  strong desire to implement balance sheet ‘B/S’ normalization despite the recent weak data.

“The FOMC took another step forward by mentioning that the Committee plans to begin implementing B/S normalization this year and providing additional details on the mechanics….

…Given Fed comments and recent data,  we now expect the Fed to announce the change to B/S policy in September and push out the next hike to December.

However, if data improve and financial conditions are favorable, it is possible that the Fed  will  deliver  both B/S and a hike in September on the view that the B/S announcement would only be a small amount of tightening,” BofAML argues.