What Happens Next?
​MIG has updated our forecasts. We now expect core PCE inflation to end the year at 2.1% (vs. 1.8% previously). We still expect two Fed rate increases in 2017 – in March and September - but with an option for a third in June.
Going forward, the key question is: Will the FOMC retain their new hawkish stance after the March meeting? Or will they pivot back to more a patient approach? A June rate increase is possible, but hinges on the answer to this question. Over coming weeks we will see how firmly the Fed embraces their new hawkish stance before we pencil in a June hike.
There is a long way to go before June’s meeting and there are several developments that could take a rate hike off the table completely:
- Job growth or inflation deviate from their current strong trajectory​
- US dollar surges and revives deflationary pressures from imports
- Financial and credit conditions tighten sharply
MIG provides investors with clarity on markets, macro and monetary policy. It combines a rigorous analytical approach with unique insight into central banks based on over a decade of experience. Clients appreciate our clear and accessible communication style
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