Fed: Thoughts on the “Dot-Plot” – RBS

By FXStreet FXStreet (Delhi) – Research Team at RBS, suggests that with most market participants considering a rate hike at this week’s FOMC meeting all but inevitable, focus has shifted squarely to expectations for the post-liftoff path.

Key Quotes

“Against this backdrop, there will be considerable attention on any changes to FOMC members’ assessment for the “appropriate” level of the Federal Funds rate in this week’s Summary of Economic Projections (SEP). In this note we discuss our expectation for those changes and address several other questions to consider with regards to the “dot-plot”.

What changes to the path are we expecting?

In the near term, we expect the median projection in the dot plot to remain nearly identical to the previous edition published in September. We look for the median dot to hold at 0.38% in 2015 and to remain at 1.38% in 2016 (100bps in hikes, or one at every other FOMC meeting). In this base-case scenario, the trimmed-mean would slip by only around 2 bps in 2016.

However, we are expecting the “depth” of the median level in 2016 to increase somewhat with 4 participants expecting 5 hikes by the end of 2016. This is one reason we find a decline in the …read more

Source:: FX Street