Fed to lower dot plot but maintain hawkish guidance next week – ANZ

Previewing the US Federal Reserve (Fed) monetary policy decision due next week, analysts at the Australia and New Zealand (ANZ) banking group noted that “the dot plot could be cut by 50+bp. Chair Powell will need to maintain hawkish guidance during the transition to lower growth and inflation so is likely to stress patience. The long run estimate for fed funds could rise.”

Additional quotes

“The extended moderation in inflation is raising confidence that aggregate price gains will return to target. However, progress on inflation is uneven across different cohorts and will take time to become balanced at 2.0%.”

“Inflation has performed better than the Federal Open Market Committee forecast in September. We expect the FOMC will lower the 2023 and 2024 dot plot. Fed funds have not reached predicted levels and inflation is lower.”