Bank of America / Merrill Lynch on the Fed today.
I posted the Goldman Sachs take here earlier:
BoAML (bolding mine):
The Fed hiked rates while signalling a lower path
- as we expected
We think Fed Chair Powell delivered a clear message when the Fed has reached the neutral target range, there is a need for greater caution and policy to become ever more data dependent
- This means that the threshold to bring rates into restrictive territory - above the neutral rate - is high. The Fed would need to see convincing data including a further decline in the unemployment rate, above target inflation with inflation expectations shifting higher and cooperative financial markets.
We are changing our call for the Fed
- We now expect the Fed to hike just two more times in 2019
- no additional hikes in 2020
- This would leave the terminal rate of the cycle to be 2.75 - 3.0% and shaves 50bp off our previous path of the Fed. The market has already shifted and is not even pricing in a full hike in 2019 with cuts in 2020. In our view, the Fed is too optimistic about the terminal rate but the market is too pessimistic.
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BoAML were at 4 hikes from the Fed in 2019 in their forecast prior to today. Further, the bank sees economic growth slowing further in H2 of next year.
On the USD - the bank says the rally is only a temporary one, it'll fall in 2019.