The FOMC members think the economic outlook is very 'uncertain' until we get more information about President-elect Donald Trump's actual economic policy.
'Almost all' FOMC members think there are upside risks to their growth forecasts due to the likely fiscal boost, which they have not fully taken into account.
Given the Fed's focus on 'Trumponomics', any comments or tweets from Donald Trump on economic policy will be followed closely.
We stick to our view that the Fed will hike twice this year (June and December) but believe the risk is skewed towards three hikes. One reason for this is that the Fed has turned more dovish this year due to shifting voting rights.
That said, we believe the Fed is likely to increase the hiking pace in 2018 (late 2017 at the earliest), as we think Trump's fiscal policy is likely to have the biggest growth impact in 2018 due to policy lags.
We now expect the Fed to hike three or four times in 2018 rather than twice as previously.
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