Here is what we expect from the September 16th FOMC meeting:
- They will leave rates unchanged;
- The SEP (summary of economic projections) is likely to show upward revisions to growth and employment forecasts.
- However, median projections will still show an unemployment rate modestly above the longer-run rate and inflation just below 2% even at the end of the forecast horizon in 2023.
- The dot plot is likely to continue to show a baseline of no rate hikes through the end of the forecast horizon, though we do expect a few participants to show hikes by 2023.
- The Fed is likely to clarify its guidance by signaling that future rate hikes will be linked to reaching an average inflation target of 2% as discussed at the Jackson Hole Summit. In our opinion, they have left a lot of work undone, including a description of how they will use their tools to achieve their goal.
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