Fed is likely to revise the 2016 growth forecasts downward - Natixis

René Defossez, Research Analyst at Natixis, suggests that the Fed is widely expected to hike the Fed funds rate by 25bps (to 0.50%-0.75%) at the FOMC meeting.

Key Quotes

“In the statement, the Fed should confirm the recent strengthening in economic activity and the improvement on the labor market (decline in unemployment rate) while continuing to emphasize its cautious approach regarding the tightening cycle. In the summary of economic projections (SEP), the Fed is likely to revise the 2016 growth forecasts downward from the September level. Growth forecasts for coming years could be revised downward as well (with stronger USD and rising oil) if no fiscal stimulus is considered. PCE inflation forecasts for 2017 and 2018 may be revised slightly higher. Moreover, we expect that the downward adjustment of the “dots” should have come to an end and that only slight changes will be seen this time. Finally, Chair J. Yellen’s press conference will be closely watched as she lays out her view of the short run monetary policy prospect.”