FOMC is set to lift the rates - ANZ

The FOMC is set to lift the target range for the fed funds rate by 25bps today and appears to be settling on plans for a very gentle unwind of its balance sheet, according to the analysts at ANZ.

Key Quotes

“Further details may be forthcoming in the Statement or from Chair Yellen’s press conference.”

“The Fed’s tightening trajectory (dot plot) is unlikely to shift at this meeting despite a likely lowering of its short-term unemployment rate forecasts. The implementation of balance-sheet normalisation will lead to a modest tightening in financial conditions.”

“If there is to be a shift in pace from the Fed, it’s possible it could be toward more gradualism if the recent subdued trend in inflation extends.”

“What we’re watching

• The ANZ GLI rose slightly in May and remains consistent with above-trend global industrial production growth.
• The ECB is set to tweak its forward guidance on rates, thus moving more toward a neutral stance from easing. 
• UK polls point to a victory for the conservative party, with a reduced majority likely. Meanwhile, polling in France suggests President Macron’s newly formed Republic on the Move (LREM) party will win a majority of the French National Assembly.”