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Elliot Clarke, analyst at Westpac, explains that the FOMC’s downwardly revised forecasts are pointing towards that the bank is likely to remain on hold in coming months, with one more hike still being expected.

Key Quotes

“In 2019 to date, the FOMC have been cautious on the economic outlook and the need for any further tightening of policy – a stark contrast to the optimistic view put forward at the December 2018 meeting, and the Committee’s expectation then of 3 further hikes.”

“At their March 2019 meeting, the Committee formally confirmed this shift in stance, with downward revisions to their forecasts for the US’ real economy and their federal funds rate profile. Chair Powell also announced that balance sheet reduction would slow from May and end in September 2019.”

“The Committee’s projected policy path sees no hikes in 2019 (the view of 11 of 17 Committee members), and only one more hike to a mid-point of 2.625% in 2020.”

“While the Committee’s longer-run view on the federal funds rate is a touch higher at 2.75%, this is best regarded as being consistent with one further hike (2.75% being the upper bound of the 2.50-2.75% range that gives the 2.625% mid-point).”