Fed Watch: A plain spoken, slightly hawkish message


The Federal Reserve raised the fed funds target range today by 25 basis points to a range of 1.75-2%, as anticipated. The Fed also made an expected technical adjustment to the way in which it implements policy. It will establish the rate of interest it pays on excess bank reserves (IOER) at 5 basis points below the upper end of the target range, or 1.95% at present. This adjustment has no policy implications other than to increase the probability that fed funds continue to trade within the established target range.

The median dot edged up for 2018 and 2019, with incremental shifts in projections for some participants tipping the scales in favor of another two policy moves this year, followed by three more in 2019. This change, driven by policymakers’ generally upbeat take on the economy, is being viewed as slightly hawkish by market participants.

In a refreshing change from what are otherwise formal proceedings, Chair Jerome Powell began his press conference with what he termed as a "Plain English" summary of the economy, what the Fed is doing and why. He also said the Fed will move to holding press conferences at every meeting.