Fed may announce an end for quantitative tightening - ANZ

Analysts at ANZ points out that the Federal Reserve’s Federal Open Market Committee (FOMC) meets this week and the recent Fed guidance points to it cutting its interest rate guidance (dot plot) by around 50bp over 2019 and 2020, leaving one hike in the forecast horizon, which ANZ don’t expect the Fed to act on.

Key Quotes

“We have taken out our final rate hike and see policy on hold.”

“The Fed’s tightening cycle looks done for the foreseeable future. Only a sharp and sustained inflation overshoot could trigger further hikes – a scenario we don’t envisage in the next couple of years.”

“The Fed may announce an end for quantitative tightening, but the specifics on the balance sheet’s hiatus period, optimal reserve holdings and the duration of its Treasury securities portfolio may not be addressed.”

“Chair Powell may be asked about whether the Fed will adopt an inflation overshoot strategy. We expect him to reiterate that the bar is high for changes to the current framework.”