Fed: Increased flexibility gives more room to pause - AmpGFX

Greg Gibbs, Analyst at Amplifying Global FX Capital, points out that the September FOMC member median projections included a fourth hike this year in December, three further hikes in 2019 and one more in 2020. 

Key Quotes

“The Fed fund futures market has largely priced in a hike in December.  It is no longer quite pricing two more in 2019.”

“The market largely sees a hike on 19 December as a done deal.  But there has to be some risk that the Fed holds-off in December.  They have scheduled press conferences at every meeting next year, and emphasised their capacity to move at every meeting.”

“With this increased flexibility it should be more inclined to pause for more than one meeting to assess market conditions and economic reports.  If they did decide uncertainty had increased and financial conditions had tightened significantly in recent months, they could quite conceivably decide to skip a hike in December, knowing that they could hike again six weeks later on 30-January if this uncertainty proved short-lived.”