Unresponsive Policy?

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Fed outlook seems dated

We don’t think the Federal Reserve was dovish enough at its recent meeting, potentially not recognizing the risks to growth that additional rate hikes represent. The Fed announced a 0.25% increase in the Fed funds rate, to a range of 2.25%-2.50%, and indicated the market should expect some further gradual rate hikes. Aggregate hikes expected in 2019 were reduced from 3 to 2, but the market wasn’t even pricing in a full 0.25% hike before the meeting. Forecasts for growth and inflation in 2019 were shaved lower to 2.3% and 1.9%, respectively — leaving inflation once again below the Fed’s target. Unfortunately, the Fed meeting didn’t ameliorate our primary risk case of the Fed overtightening policy.