Fewer Federal Reserve officials expect the central bank to raise interest rates more than once this year, as policy makes gave a mixed picture of the economy where growth is picking up and job gains are slowing. While the median forecast of 17 policy makers remained at tow quarter point hikes this year, the number of officials who see just one move rose to six from one in the previous forecasting round in March.
Wow! Two weeks ago a July hike was all but assured but the weakest jobs report since 2010 squashed these expectations.
The median projection of officials for the federal funds rate at year end remained at 0.875%, thus implying two quarter point increases in the Committees four remaining meetings.
Perhaps also of significance are the Fed’s comments about next week’s Brexit vote stating that such is a headwind and the outcome is unquantifiable if the British electorate decides to exit the EU.
I rhetorically ask what happens to expectations (and Fed confidence) if Julys’ jobs data is considerably stronger than expected, validating recent statistics of increasing strength?
Markets had a mixed response to the outcome, advancing nominally higher after the statement but closed virtually unchanged. Treasury yields and the dollar ended lower and crude capped the longest run of declines in four months. Some commented Brexit fears as the cause for yesterday’s closing.
Last night the foreign markets were down. London was down 0.71%, Paris down 0.78% and Frankfurt down 0.94%. China was down 0.50%, Japan down 3.05%and Hang Sang down 2.10%.
The Dow should open moderately lower on increased concerns about the global economic outlook and next week’s Brexit vote. The 10-year is up 2/32 to yield 1.57%.