As a reminder, the FOMC raised the fed funds rate target by 25bps in December, in line with the analyst median forecast.
The central bank also narrowed the trajectory of rate hikes going forward, now envisaging two hikes in 2019, and one in 2020 (previously it had seen three hikes in 2019 and one in 2020). Crucially, the FOMC lowered its estimate of the neutral rate (to 2.8% from 3.0%), and additionally, the central bank softened its guidance on future rate hikes, saying that “some further gradual increases” to rates (versus the previous “further gradual increases”), even as the market continues to expect that the Fed’s rate hike cycle is now over and even expects a rate cut in 2020.
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