On the September FOMC

Leaving the “dot” for year-end 2023 at 5-5/8%, the Fed has effectively announced that one-and-done is now a worst-case scenario. But apparently to prevent market exuberance, the FOMC sharply moved up the dot for 2024 to suggest that the funds rate will stay at an admittedly restrictive level longer than previously expected. The cover story is an upgrade to growth expectations – but the actual forecasts are so tepid they couldn’t possibly contribute to inflation risk, even within the Fed’s flawed analytic framework. As of this writing markets are not taking the Fed’s guidance seriously, with little more than a 50/50 chance of a hike by December.