Fed: Market to focus on ‘dot plot’, Yellen not so convinced - Commerzbank

The Fed will release the Fed members' updated projections this Wednesday, but according to Bernd Weidensteiner, analyst at Commerzbank, even though markets will be interested in the ‘dot’ plot, the Fed no longer appears to be convinced of the usefulness of these key rate projections.

Key Quotes 

“The growth forecast for 2016 may again be reduced a bit; in its June projection the Fed had assumed 2.0% GDP growth. On the other hand, there seems to be no need for major changes in the rate of unemployment as well as inflation”.

“The market is likely to focus on the 'dots' anyway, i.e. the meeting participants' view of an appropriate key interest rate. In the June projection, six members had been looking for one rate move by year-end, while nine members expected two steps and two members more than two steps. This view is likely to shift lower again as there are only two meetings left this year (on 1/2 November and 13/14 December).”

“The Fed no longer appears to be convinced of the usefulness of these key rate projections anyway. Janet Yellen keeps highlighting at every meeting that these views are based on current data and therefore subject to changes. It should by no means be taken as a fixed plan with regard to the key interest rate path. Economic data were crucial, she said.”