Fed Nearing a Critical Inflection Point
​December’s FOMC meeting will be a critical inflection point for Fed policy as they shift from “near-term hawks†to “long-term dovesâ€.
MIG maintains our longstanding call for an “Apologetic Increase†in December – a 25bps increase in the policy rate that comes with explicit dovish language about subsequent rate hikes. Fed speakers have accentuated the positive developments in labor markets and the recent upward move of inflation. Markets have responded accordingly to this by increasing rates and strengthening the dollar. However, when markets recognize the full magnitude of the Fed’s dovish tilt in the aftermath of December’s meeting, we expect USD and rates to soften considerably.
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