FOMC Minutes: Shifting risks, rising uncertainty – HSBC

According to Kevin Logan, Chief US Economist at HSBC, one of the puzzles of the December FOMC meeting was the seeming contradiction between virtually unchanged forecasts for growth and inflation in 2017 and the rise in the median projection for rate hikes in 2017 from two to three.

Key Quotes

“The minutes of the December meeting show that the outcome of the November election led many of the policymakers to change their view about the “risks” to their forecasts. Most of the “risk” changes were tilted to the upside for growth and away from the downside for inflation. This was enough to cause some Committee members to lift their assessment of the appropriate number of rate hikes in 2017.”

“The minutes also showed that the policymakers stressed the uncertainty about the fiscal outlook, suggesting that there is no intention to hike the federal funds rate in the near-term. We continue to think that the next rate hike will take place in June, followed by another in December for a total of two 25bp rate hikes in 2017.”