CIBC notes the Fed's updated projections are "easily overlooked
given the surprise taper decision", particularly as they showed
little divergence from those of September. It says projections for
PCE inflation were downgraded very slightly in the near term, and
if its more optimistic forecast for the U.S. economy in 2014 is
correct the GDP forecast for 2014 (2.8%-3.2% Q4/Q4 and little
changed from September) could still be a "little on the low
CIBC says the unemployment rate projection for the end of 2014,
now 6.3-6.6%, shows that Fed officials see the real possibility of
hitting 6.5% before the end of next year, and will be one of the
reasons why the statement stressed unemployment would have to move
well past that level before rate hikes would be forthcoming.
On a slightly more dovish note, three participants now expect
the first rate hike to come in 2016, compared to only two in the
previous projections, presumably due to the softer inflation
profile, CIBC says. All told though, these are only small tweaks to
the projections and will do little to divert market attention from
the surprise taper decision, it adds.
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