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FOMC Set To Hike But No New Policy Signals

Published 09/26/2018, 02:33 AM
Updated 05/14/2017, 06:45 AM

Market movers today

In the US, the week's most important event is happening tonight, namely the FOMC meeting with the rate announcement due at 20:00 CEST, see FOMC preview: Destination neutral , 21 September 2018. We expect the Fed to hike the target range to 2.00-2.25%, but not send any new policy signals . With respect to Fed projections, it will most likely still signal another hike in December (and probably that more FOMC members support this) and three hikes next year (it was divided between two or three additional hikes next year and it would take four members to move it higher).

The Fed will also still signal that it is going to raise the Fed funds rate above the longer-run rate . The longer-run rate may be revised higher to 3.00%. It seems on track to deliver two more hikes this year (next week and in December). Growth is strong, optimism is high, the unemployment rate is low, wage growth is increasing (although at a gradual pace) and core inflation is running near the 2% target. We believe it will be more 'stop and go' for the Fed when the funds rate has reached neutral (2.75-3.00% range), which we believe is likely to happen in March 2019.

In Norway, unemployment statistics from Statistics Norway (LFS) are due today, which will provide important information on whether economic growth is still above trend. We expect the underlying recent downward trend in the unemployment rate to continue, with LFS unemployment dropping to 3.8% in July (June-August).

To read the entire report Please click on the pdf File Below:

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