Was the FED hawkish or dovish? The team at SEB looks at the bigger picture:
Here is their view, courtesy of eFXnews:
The Fed left monetary policy unchanged at the FOMC meeting that concluded today.
Reading the FOMC statement there were only minor changes from the December statement. Economic activity and the labour market continued to expand at a moderate pace according the FOMC. However, one sentence had been added this time compared to the Dec statement, where the FOMC now highlights that measures of consumer and business sentiment “have improved of lateâ€. This is probably one way for the FOMC to indicate that upside risks to the current Fed forecast has increased since December.
Given there is very little new information about fiscal policy since the last meeting, uncertainty of what to expect prevails for the FOMC just as for the rest of us. More information about the new budget and its potential impact on the economy is probably available at the next Fed meeting on March 14-15, which also will include a press-conference and updated forecasts.
Although the Fed median forecast since the Dec. meeting indicates 3 hikes this year we maintain our view of two hikes and it will probably take until June before we can expect the next rate hike from the Fed. This view is also reflected in current market pricing (73% prob. according to prices on Fed fund futures, up from 71% prior to today’s decision). This far the Fed has been very cautious with tightening monetary policy as it would be very difficult to reverse the policy given how close to the zero-bound the policy rate still is.
The FOMC today voted unanimously to maintain current policy.
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