FOMC statement: supportive of Fed’s medium-term expectations for multiple hikes over coming years - Wells Fargo

According to analysts from Wells Fargo, despite the economic outlook was little changed, the Federal Reserve, signaled yesterday that stronger action may be taken in 2017, than what was previously thought.

Key Quotes: 

“Spanning a full year since the first rate action was taken in the current tightening campaign, the Federal Open Market Committee raised the federal funds target rate 25 basis points at the conclusion of today’s twoday meeting to a range of 0.50 percent to 0.75 percent. The move had been fully priced into the financial markets for weeks and was not a surprise.

“On trivial outlook changes, some officials do appear to be taking the incoming administration’s policy intentions into consideration. The median expectation for the appropriate pace of monetary tightening increased to three hikes in 2017 from the previous estimate of two hikes, although this represents only a small change in the overall committee’s view.”

“We take today’s policy statement and economic outlook as supportive to the Fed’s medium-term expectations for multiple rate hikes in each of the coming years. Attention now clearly turns to the size, scope and timing of pending fiscal stimulus as well as the incoming data regarding the performance of the U.S. economy, particularly on the labor and inflation fronts. If these measures were to exceed expectations, the timing of the next rate hike could be pulled forward considerably. Indeed, progress made on the fiscal policy front could heighten expectations considerably at the March 15 FOMC meeting.”