Janet Yellen and The Fed Do Not Disappoint The Markets

John M. Bland, MBA, co-founder, global-View.com

Fed Raises Fed Funds Target By 25bps On Wednesday December 13, the FOMC announced a +25bp hike in its Fed Funds target range to 1.25-1.50% from 1.00-1.25%. This hike was as widely expected, after having been signaled by the Fed. The Fed also released its quarterly “dot plots” forecasts for the Fed Funds rate in 2018. It showed members of the committee as a group were expecting three rate hikes in the new year. Many in the markets had been expecting these forecasts might show four rate hikes. As for the Fed Funds futures markets, even afterwards traders were still expecting only two hikes in the new year. Personally, I have little confidence in these estimates because the Fed professionals have over-estimated inflation and interest rate levels for so many years, they have to be second-guessing themselves by now. I think 2018 will be a tough call, because the economy is finally starting to show some accelerating momentum which could quickly start to result in rising inflation. If inflation finally starts to rear its ugly head, interest rates will be quick to respond. Monetary policy in the new year is likely to be very much data dependent. It will pay more than ever iin the months ahead to keep breast of basic economic trends.

Jerome Powell to Succeed Chair Yellen In Early February 2018 After Upcoming FOMC This meeting was Chair Yellen’s final FOMC meeting with a press conference. Her final meeting will be at the end of January 2018. In the days following that conference, it is expected that Fed Chair–designate Jerome Powell will take her place. He still is awaiting final Senate confirmation, but most feel his approval is a sure thing. As for Yellen at the Wednesday meeting, she seemed to be going to great lengths to assure a smooth transition of power. In terms of policy, Powell appears to favor the gradual tightening of policy being pursued by the current Yellen Fed. One thing to be aware of, is that the policy board rotation of voting members in the new year could result in a more hawkish policy voting bias. A shift in the basic tone of the Fed board could be USD constructive if the pace of economic growth in the U.S. continues to pick up steam as expected.

Amazing Trader EVENT RISK Calendar:

Mon 18 Dec

10:00 EZ- final HICP

Tue 19 Dec

09:00 DE- IFO Survey

13:30 US- Housing Starts/Permits

13:30 US- Current Account

Wed 20 Dec

15:00 US- Existing Homes Sales

15:30 US- EIA Crude

Thu 21 Dec

03:00 JP- BOJ Decision

13:30 CA- CPI & Retail Sales

13:30 US Weely Jobless

13:30 US- GDP

Fri 22 Dec

09:30 US- GB- GDP

13:30 US- core PCE Deflator & Presonal Income

15:00 US- New Homes Sales

15:00 US- final University of Michigan

17:00 US- early Closes

Mon 25 Dec

00:00 Christmas Holidays

Be sure to refer daily Global-View to see the continuously UPDATED Economic Calendar and the Forex Forum for the complete list of key items (actual data, selected charts, etc.) as they are released.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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