Assuming the expected happens, the focus will be on the wording of the statement, the projections, and Fed Chair Jerome Powell's press conference to try to determine how many rate hikes to expect in 2018 and in 2019.
Here are the March FOMC projections.
Current projections for Q2 GDP range from 3.1% to 4.5%. GDP increased at a 2.2% real annual rate in Q1. This puts first half GDP close to the top of the expected range, and GDP projections might be revised up.
| GDP projections of Federal Reserve Governors and Reserve Bank presidents | |||
|---|---|---|---|
| Change in Real GDP1 |
2018 | 2019 | 2020 |
| Mar 2018 | 2.6 to 3.0 | 2.2 to 2.6 | 1.8 to 2.1 |
| Dec 2017 | 2.2 to 2.6 | 1.9 to 2.3 | 1.7 to 2.0 |
The unemployment rate was at 3.8% in May. So the unemployment rate projection for 2018 will probably be lowered.
| Unemployment projections of Federal Reserve Governors and Reserve Bank presidents | |||
|---|---|---|---|
| Unemployment Rate2 |
2018 | 2019 | 2020 |
| Mar 2018 | 3.6 to 3.8 | 3.4 to 3.7 | 3.5 to 3.8 |
| Dec 2017 | 3.7 to 4.0 | 3.6 to 4.0 | 3.6 to 4.2 |
As of April, PCE inflation was up 2.0% from April 2017. Based on recent PCE readings, PCE inflation will likely be revised up for 2018.
| Inflation projections of Federal Reserve Governors and Reserve Bank presidents | |||
|---|---|---|---|
| PCE Inflation1 |
2018 | 2019 | 2020 |
| Mar 2018 | 1.8 to 2.0 | 2.0 to 2.2 | 2.1 to 2.2 |
| Dec 2017 | 1.7 to 1.9 | 2.0 | 2.0 to 2.1 |
PCE core inflation was up 1.8% in April year-over-year. Core PCE inflation might also be revised up for 2018.
| Core Inflation projections of Federal Reserve Governors and Reserve Bank presidents | |||
|---|---|---|---|
| Core Inflation1 |
2018 | 2019 | 2020 |
| Mar 2018 | 1.8 to 2.0 | 2.0 to 2.2 | 2.1 to 2.2 |
| Dec 2017 | 1.7 to 1.9 | 2.0 | 2.0 to 2.1 |
In general the data has been somewhat firmer than the FOMC's March projections, so it seems likely the FOMC will be on track for four rate hikes in 2018.
from Calculated Risk https://ift.tt/2JH8uLh
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