The growth projections of the FOMC members have been revised downwards and the unemployment projection has seen an upward revision. The projections for the federal funds rate (the “dots”) have dropped 50 basis points. The Fed chairman considers the outlook to remain favourable, adding that it is a great time to be patient. Markets are less upbeat. They interpret patience as an underlying concern about downside risks and price a rate cut in the course of next year. We expect the policy rate to stay at its current level, this year and next.
The latest economic data are globally in line with, or even above, expectations. Some indicators remain at a high level compared to their long-term average. The further and significant deterioration in manufacturing activity draws our attention.