U.S. ECONOMICS: CIBC Reacts To Fed's Updated Projections


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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 side."

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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This article appears in: Investing , Commodities

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