We infer which dot each FOMC participant put down for 2018 at the March 2018 FOMC meeting.
▪ The median expectation for rate hikes in 2018 remained at three as the distribution clearly shifted up, with an equal number of three-hike and four-hike dots. No policymaker thought staying at two hikes this year was enough tightening—which probably means Brainard, Evans, and Harker all moved up to three hikes. There are now seven dots with four hikes or more.
▪ The three-hike dots likely are Bostic, Brainard, Evans, Harker, and Kaplan.
▪ The four-hike dots likely are Barkin, Dudley, Mester, Rosengren, and Williams.
▪ As such, Chairman Powell was likely the remaining three-hike dot and Quarles the remaining four-hike dot. The median barely remained at three hikes and the eighth dot would have been the median dot. Powell probably considered it a strategic matter, opting to keep the median at three even if his macro outlook puts him above three.
▪ However, if Barkin or another presumed four-hiker in fact advocated for three hikes instead, then Powell (and Quarles) could be at four hikes.
|Policymaker||Number of ’18 Hikes||’18 Year End Funds Rate||Rationale|
|Powell||3||2.125||Mar. 21: “There is no sense in the data that we are on the cusp of an acceleration of inflation.”|
|Quarles||4||2.375||Mar. 6 Speech|
|Dudley||4||2.375||Jan. 12: “It’s more than three.”|
|Rosengren||4||2.375||Mar. 1: “If you were to go to four 25bp rate hikes I think it would still be gradual.” “Whether [a better outlook] necessitates a faster pace of tightening, I think that remains to be seen.”|
|Harker||3||2.125||Feb. 21: “I’ve penciled in two hikes for 2018.”|
|Mester||4||2.375||Feb. 13: “There’s more salient upside risks to the forecast than we’ve seen in quite a while.” “I expect the short-run neutral rate to move up over time as the expansion continues.” “I put a quarter to a half percentage point on extra growth from those over this year and next year — given what I’ve seen so far in how people have said they’ve reacted to the tax cuts. I think it potentially could be bigger than that, so that’s an upside risk to the forecast”|
|Bostic||3||2.125||Mar. 23: “Our models and my forecast had three moves for this year.”|
|Evans||3||2.125||Feb. 7: “With the data I see today, my policy strategy would be to keep policy on hold until mid-year or so in order to assess the incoming inflation data.” “Suppose inflation picks up more assuredly, as many expect. Then, we still could easily raise rates another three or even four times in 2018 if that were necessary.”|
|Bullard||1||1.625||Feb. 26: “Forward guidance should be characterized by a relatively flat policy rate path.” Mar. 12: “I know I have been dismissive of fiscal policy effects, but I am willing to hedge my bets a little bit and move a little bit in response to that.”|
|Kashkari||1||1.625||Mar. 23: Supported the move this week to show continuity between the Powell Fed and his predecessor, Janet Yellen, though he did not think the economic data warranted a rate increase at this time (Bloomberg).|
|George||5||2.625||Feb. 8: Three hikes is a “reasonable baseline unless the outlook changes materially.”|
|Kaplan||3||2.125||Mar. 23: “My base case continues to be three for the year.”|
|Williams||4||2.375||Feb. 23: “Based on how the economy is doing, where I see it going, it makes sense to think about three to four rate increases in 2018.” If this economy were allowed to run too hot, for too long, we would see further imbalances occur.”|