USD: FOMC Signals 2 More Hikes In ’18 In Line With Our Call But There Is Another Hawkish Move – SEB

The Fed raised rates and upgraded its dot plot. Yet the US Dollar did not hold onto to its gains. What’s next?

Here is their view, courtesy of eFXdata:

“As expected, the Fed raised the target range for the federal funds rate to 1.75 to 2.00 percent at the FOMC meeting that concluded today. The vote was unanimous. The Fed’s revised forecasts were mostly in line with our expectations. Most importantly, the Committee’s median forecast for the fed funds rate shifted to indicate a total of four rate hikes in 2018. This means that our forecast of two additional hikes in 2018 (September and December) is now aligned with the Fed’s own view.

For the time being, we stick to our forecast of two additional hikes in 2019 but the Fed’s revised forecast suggests three hikes in 2019. The Fed also made a technical adjustment to the interest rate on excess reserves (IOER) to correct for the effective rate being above the target range mid-point,” SEB notes.

“At the press conference, Powell revealed that the Fed will start press conferences at every meeting in January. This could be interpreted as a hawkish move since the Fed has only hiked at meetings followed by a press conference during this hiking cycle,” SEB adds.

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