Here’s another dig at the fed funds rate projections. The central tendency is pretty much unchanged. However, overall, the projections argue that the doves in FOMC are getting less dovish. And that should be Dollar supportive. We might see the greenback quickly regains growth after initial spike lower.

Firstly, let’s clarify that median means middle projection. Central tendency excludes the three highest and the three lowest. Range includes everyone’s projections.

Now, the central tendency projections are pretty much unchanged. Except that it’s lowered from 3.1-3.6 in 2020 to 2.9-3.6 in 2021. That is, some might expect a cut in 2021? That’s possibly for the expectation of deeper slow down in GDP growth to 1.6% and faster rise in unemployment rate to 4.0%.

The “range” projections are more interesting. For 2018, it’s changed from 1.9-2.6 to 2.1-2.4. That is normal given that it’s already September and expectations converged.

For 2019, range changed from 1.9 – 3.6 to 2.1 – 3.6. That means, doves are in some ways conceding ground but hawks stayed the same. Fed should be more “firm” on its path for another three hikes next year.

For 2020, range changed from 1.9-4.1 to 2.1 – 3.9. That means doves become less dovish and hawks become less hawkish too!

For 2021, range is at 2.1 – 4.1, suggesting some might have pushed back another hike in 2020 to 2021.

Long run range was changed from 2.3 – 3.5 to 2.5 – 3.5. That suggests doves also agree to a rise in neutral rate estimate. Another sign that they’re less dovish.

The most important parts of the new proections are firstly, median fed funds rate projection is unchanged at 3.4% in 2021. That is, Fed expects to stop after three hikes in 2019 and one more in 2020. However, secondly, the longer run federal funds rate was raised from 2.9% to 3.0%. That is, the neutral rate was somewhat lifted.

All in all, Fed’s new projections clearly show that the impact of fiscal stimulus of tax cuts and others would fade rather quickly, with notable fall in GDP growth in 2021 and rise in unemployment rate too. With core inflation holding at 2.1% in 2021, there is no need for further rate hike.

GDP projections for 2018 and 2019 are raised to 3.1% and 2.5% respectively. For 2020, GDP projection was kept unchanged at 2.0%. For 2021, it’s forecast to slow further to 1.8%.

Unemployment rate projection for 2018 was raised from 3.6% to 3.7%. For 2019 and 2020, it’s kept unchanged at 3.5%. And unemployment rate is expected rise back to 3.7% in 2021.

Core PCE projection was unchanged through out, at 2.0% in 2018, 2.1% in 2019, 2020 and 2021.

Fed raised federal funds rate to 2.00-2.25%, on unanimous vote. Full statement below.

Federal Reserve issues FOMC statement

Information received since the Federal Open Market Committee met in August indicates that the labor market has continued to strengthen and that economic activity has been rising at a strong rate. Job gains have been strong, on average, in recent months, and the unemployment rate has stayed low. Household spending and business fixed investment have grown strongly. On a 12-month basis, both overall inflation and inflation for items other than food and energy remain near 2 percent. Indicators of longer-term inflation expectations are little changed, on balance.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2 percent objective over the medium term. Risks to the economic outlook appear roughly balanced.

In view of realized and expected labor market conditions and inflation, the Committee decided to raise the target range for the federal funds rate to 2 to 2-1/4 percent.

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.

Voting for the FOMC monetary policy action were: Jerome H. Powell, Chairman; John C. Williams, Vice Chairman; Thomas I. Barkin; Raphael W. Bostic; Lael Brainard; Richard H. Clarida; Esther L. George; Loretta J. Mester; and Randal K. Quarles.