Fra BNP Paribas:
US FOMC: See you in December
* The FOMC kept rates unchanged at its 1-2 November meeting, as expected. The Committee moved a little closer to the next hike, but is still data-dependent. We see about a 75% chance of a 25bp hike at the 12-13 December meeting, up from 65% before today’s statement.
* The Committee still considers near-term risks to the economic outlook to be “roughly balanced”, and continues to closely monitor inflation indicators and global and financial developments.
* The case for an increase in the federal funds rate “continued to strengthen”, but the FOMC “decided, for the time being, to wait for some further evidence of continued progress toward its objectives.” The addition of “some” was significant and confirms we are closer to the next hike than we were in September.
* The Committee had some tangible progress to report on inflation moving to target: It acknowledged that inflation has moved a little higher since earlier in the year and that market-based measures of inflation compensation have “moved up but remain low.” * The description of household spending was downgraded slightly to “rising moderately” from “growing strongly”.
* There were two dissents (George and Mester), down from three at the September meeting. Boston Fed President Rosengren withdrew his dissent and today voted with the consensus, as expected.
