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18 Sep 2014
Hawkish shift in the dot plot - Rabobank
FXStreet (Guatemala) - Analysts at Rabobank explained that although the FOMC participants downgraded their GDP forecasts for 2014 and 2015, they also revised downward their unemployment rate forecasts for 2014, 2015 and 2016.
Key Quotes:
“For 2015, they now expect GDP to grow by 2.6-3.0% (central tendency) instead of 3.0-3.2%. But at the same time, they expect unemployment to reach 5.4-5.6% instead of 5.4-5.7%”.
“Unemployment is more important than GDP in the eyes of the Fed, so they revised upward their forecasts of the fed funds rate for 2015 and 2016. The median forecast for 2015 rose to 1.375% from 1.125%, and for 2016 it rose to 2.875% from 2.500%. This was the hawkish signal that pushed up US treasury yields, while the S&P500 had more difficulty digesting this information”.
“The projections included 2017 for the first time and showed that the Committee expects the fed funds rate to have reached its long run equilibrium level of 3.75% by the end of 2017”
Key Quotes:
“For 2015, they now expect GDP to grow by 2.6-3.0% (central tendency) instead of 3.0-3.2%. But at the same time, they expect unemployment to reach 5.4-5.6% instead of 5.4-5.7%”.
“Unemployment is more important than GDP in the eyes of the Fed, so they revised upward their forecasts of the fed funds rate for 2015 and 2016. The median forecast for 2015 rose to 1.375% from 1.125%, and for 2016 it rose to 2.875% from 2.500%. This was the hawkish signal that pushed up US treasury yields, while the S&P500 had more difficulty digesting this information”.
“The projections included 2017 for the first time and showed that the Committee expects the fed funds rate to have reached its long run equilibrium level of 3.75% by the end of 2017”