FOMC sees growth firming and gradual normalisation appropriate - ANZ

Analysts at ANZ note that the Fed raised rates 25bps, taking the IOER to 1.75% and left its guidance on rates unchanged for this year i.e. two more hikes are expected, but it raised its estimate for fed funds in late 2020 by 30bps to 3.4%.

Key Quotes

“The boost to growth from fiscal expansion should to be temporary. Growth forecasts were revised up to 2.7% this year and 2.4% next, but the long run potential growth estimate was unchanged at 1.8%.”

“Fed Chairman Powell’s press conference conveyed continuity. The Philips curve is flat; the Fed is committed to keeping inflation around 2.0%. Wage gains and price rises have been moderate recently, but there is no evidence that inflation is accelerating.”

“US bond yields were little changed and the dollar sold off modestly.”