When will the Fed stop tightening?
Since December 2015, the FOMC has raised the federal funds target range six times, with the current rate standing in the 1.50-1.75% range, the forward guidance from the central bank is for another two or three this year followed by another three in 2019, projecting a policy rate of 2.1% in 2018 and 2.9% the following year. Given that the FOMC members’ median projection of the federal funds rate in the long run has come down from 4.0% in September 2012 to 2.9% in September 2016 and has remained unchanged ever since, numerous analysts have been questioning whether the ongoing tightening cycle is coming close to an end. In addition, there is a debate on the likely peak of the cycle, the eventual level of the long run federal funds rate, and whether the FOMC will decide to overshoot it.
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