CIBC Research discusses its reaction to today's FOMC policy decision.
"The FOMC came together, saw the economy was still strong, and hiked interest rates 25bps for the third time this year. Guidance for the near term trajectory of interest rates was also unchanged, with the statement saying that "further gradual increases" will be consistent with its mandate and the dot plots showing one more hike this year and three in total for 2019. However, the longer term guidance was a little more interesting. The statement dropped the sentence that "monetary policy remains accommodative", presumably because the Fed funds rate at 2-2.25% is now getting closer to the 3% long term forecast (which was a slight upward revision vs the last forecasts)," CIBC notes.
However, the dot forecast for 2021, which was new this time, shows interest rates remaining at 3.375%, rather than coming down closer to that long-term projection. Even though the messaging regarding longer term prospects for interest rates seems a little mixed, markets appear to be paying more attention to the dropping of policy remaining accommodative, seeing the US$ and bond yields fall slightly," CIBC adds.