The initial reaction to the Fed decision has been seen as more hawkish with some suggesting that the downgrade to inflation forecast may not have been as large as some analysts had expected
Reaction details (19:19)
- The market initially viewed the decision as dovish (lowering of long run FFR), but then changed tack as markets have to reprice expectations of a hike. There was an initial spike lower in USD but that quickly reversed. Treasuries have now declined with US 10y yield up 3bps. Gold also fell to its lowest in three weeks but has so far held above USD 1300/oz.
Analysis details (19:13)
- More members of the FOMC also favoured a hike in the near term with 11 expecting a hike by year end, compared to 8 previously. This may cause some repricing as markets were only pricing in a roughly 50% chance of a hike in December.
- The market had also only been pricing in one hike in 2018 but the Fed still expect three further hikes next year.
- Nevertheless, the Fed had lowered their median view of the long-term Fed funds rate to 2.8% from 3.0%.
20 Sep 2017 - 19:12- Fixed Income- Source: RANsquawk
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