March 21, 2019

The Fed gets more concerned: no rate hikes in 2019, earlier end of the balance sheet runoff

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In Short

In an acceleration of the dovish pivot undertaken since December, the Fed has marked down the growth and inflation outlook for this year and next. Consequently it now envisages only one more rate increase, in 2020. The fed fund rate will then remain below its long term value for the next three years.
The Fed gets more concerned: no rate hikes in 2019, earlier end of the balance sheet runoff
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Highlights:

  • In an acceleration of the dovish pivot undertaken since December, the Fed has marked down the growth and inflation outlook for this year and next.
  • Consequently it now envisages only one more rate increase, in 2020. The fed fund rate will then remain below its long term value for the next three years.
  • Moreover, the balance sheet Runoff will end by the end of September, a couple of months earlier than we expected; the pace of balance sheet reduction will slow down from May.

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THE FED GETS MORE CONCERNED: NO RATE HIKES IN 2019, EARLIER END OF THE BALANCE SHEET RUNOFF

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