The Fed adopts a cautious approach for 2020-2021

What to retain from the Fed meeting?

• Fed raised interest rates by 25bp to 2%-2.25% for the third time in 2018 as expected by the markets.

• The Fed dropped the word “Accommodative” from the policy statement.

• Tariffs: no impact on the aggregate performance of the US economy at this stage. On the downside risk, Tariffs could drive up materials costs and cause higher inflation.

• FOMC members showed stronger confidence in short term growth prospects and higher uncertainty around 2020-2021. Median forecasts for interest rates pointed to one more rise this year, followed by three increases in 2019 and another in 2020. No hike expected in 2021.

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