HALISTER1: FOMC’s Own Rates Outlook Lagging Behind Appropriate Path: UBS

FOMC’s Own Rates Outlook Lagging Behind Appropriate Path: UBS

(Bloomberg) -- “Under all but the most aggressive combination of assumptions, the FOMC’s own outlook for rates places them well behind the appropriate policy path” based on models, UBS economists Drew Matus, Dave Liang, Samuel Coffin write in note.
  • Analysis based on a number of Taylor Rule scenarios, as well as adjustments to rule to gauge potential impact of lower natural rate of interest, Fed’s balance sheet and possibility of higher inflation target
    • Suggests FOMC appears unconcerned about any stimulative impact of balance sheet, isn’t acting as if it will implement a higher inflation target in near term and isn’t set on “right” natural rate of interest remaining near zero
  • FOMC to remain cautious; UBS expects Fed to hold rates steady in Sept. with a hike in Dec. and 2 more in 2017; “some upside risk to this scenario”
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Drew Matus (UBS Asset Management Japan Ltd)
Samuel Coffin (UBS Global Asset Management Japan Ltd)
David Liang (UBS Securities LLC)

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