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.
