On September 21, the FOMC decided not to hike the fed funds, even it the statement “judges that the case for an increase in the federal funds rate has strengthened.” The committee has “decided, for the time being, to wait for further evidence of continued progress toward its objectives.” FOMC members have again downgraded their projections for the fed funds (the so-called “dots”). The median dots say: one hike in 2016, two hikes in 2017, three in 2018 and they suggest the end of the tightening cycle in 2019. The pace of the “projected” tightening has also been revised down for the two coming years. Importantly, the lower half of the dots say, which roughly correspond to members of the Board of Governors) say: one hike in 2016, one to two hikes in 2017.This is a substantial shift compared with the June projections. Slowly, the views of FOMC members are converging towards market expectations.
