ANALYSIS: Dovish reaction to FOMC rate decision

FOMC hikes rates by 25bps, as expected, and removed the reference in its statement that policy is ‘accommodative’. Forecasts were little changed. The dovish reaction to the rate decision and forecasts is likely a result of the fact that the Fed’s new 2021 dot looks for rates to be between 3.25-3.50%, matching its 2020 projection, and thus hinting that the FOMC has put an end date to its hiking cycle. Additionally, it appears that the FOMC does not intend to raise rates above its estimate of neutral (neutral rate estimates are between 2.50-3.50%).