Fed rate hike on expected lines – NBF

Jerome Powell started his tenure as Fed Chairman with an expected interest rate hike amidst a much-improved U.S. economic outlook, according to Krishen Rangasamy, Research Analyst at NBF.

Key Quotes

“The recently passed Bipartisan Budget Act, which included significant fiscal stimulus, prompted the Fed to raise its U.S. growth estimates over the forecast horizon, which explains the increased confidence within the FOMC about hitting its 2% inflation target. So much so, that the latest dot plot and Summary of Economic Projections point to a higher path for the fed funds rate compared to last December. But that’s not to say monetary policy is about to become overly restrictive.”

“The real fed funds rate is projected to remain well below levels that historically had been associated with positive output gaps.”