Thursday, October 26, 2017

Goldman: "On Course for a December Hike"

by Bill McBride on 10/26/2017 01:46:00 PM

CR Note: The FOMC meets next week, and no change to policy is expected. However it appears another rate hike is coming at the December meeting.

A few brief excerpts from a piece by Goldman Sachs economist Spencer Hill: On Course for a December Hike

We expect the FOMC to keep policy unchanged next week and see few substantive changes to the statement.

We expect a slightly more upbeat tone on growth that acknowledges the disruptions from the hurricanes but characterizes them as temporary or in the past tense ... Despite the disappointing September CPI report, we do not expect a downgrade of the inflation assessment or outlook, reflecting broadly stable year-over-year inflation and the further decline in the unemployment rate.

We expect the statement to acknowledge that balance sheet normalization was “initiated” in October, but we do not expect further discussion of the topic, given the lack of adverse market reaction and the passive nature of the run-off. We also look for the characterization of current policy (“accommodative”) to remain unchanged.