Fed:  Another hike in March before long pause - Wells Fargo

After a 2-day meeting, the FOMC raised the Fed Funds rate to 2.25-2.50%. According to analysts from Wells Fargo, despite the hike, the Fed acknowledged that it is moving into data-dependent mode.

Key Quotes: 

“Although the committee did hike rates by 25 bps today, it dialed back its assessment for further tightening. The FOMC had been stating that “further gradual increases in the target range for the federal funds rate” would be needed going forward. The statement now reads “some further gradual increases…”. In other words, the guidance for further rate hikes is not as open ended as it was in the last policy statement.”

“The FOMC also acknowledged that it is moving into data-dependent mode. The committee continued to state that the “risks to the economic outlook appear roughly balanced.” But today the FOMC added that it “will continue to monitor global economic and financial developments and assess their implications for the economic outlook.” 

“In short, weaker-than-expected data, both in the United States and/or in major foreign economies, could derail further rate hikes, at least for the foreseeable future. Continued volatility in financial markets could also cause the Fed to pause.”

“The FOMC also reduced its forecast for GDP growth next year.”

“We look for the FOMC to hike rates by another 25 bps at its March meeting before going on a long pause until September. But we acknowledge that the timing of any future rate hikes remains uncertain and will depend on incoming data.”

“If, as we expect, growth remains solid in coming months, then we think that the outlook for future rate hikes, albeit at a slower pace, remains reasonable.”