FOMC Hikes Rates As Expected, Signals Two More Rate Hikes In 2018

Having signaled a rate-hike 'no matter what', The Fed delivered 25bps (as the market 100% expected), cut its reference to "rate below long-run levels for some time," and signaled its expectations for two more rate-hikes in 2018.

Key takeaways from FOMC decision:

  • Fed raises rates as expected, 8-0 vote
  • In the latest dots, the rate hike path steepens a little this year, still aiming at 3.4% end-2020; longer-run neutral rate still seen at 2.9%
  • FOMC statement says economy growing at "solid rate,'' job gains have been "strong,'' consumer spending has picked up and investment continued to grow "strongly''
  • The Fed removed the low inflation line: "Market-based measures of inflation compensation remain low"
  • Language about the economy upgraded, line about rates remaining below long-run levels "for some time'' was removed
  • The sentence got tweaked: "The Committee expects that further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee's symmetric 2 percent objective over the medium term.''
  • IOER rate raised 20bps to 1.95% as of June 14; discount rate goes up to 2.5%

The median 'dot' for the end of 2018 has been 2.125% since Dec 2016 and today's dot plot shifted higher to 2.375% confirming The Fed's expectation for two more rate hikes this year, while the 2019 dot rose from 2.9% to 3.1%, suggesting the hiking carries through.

Here is the full breakdown of the median dots:

  • 2018 is 2.375% vs 2.125% in March;
  • 2019 is 3.125% vs 2.875% in March.
  • 2020 and longer-run medians are unchanged at 3.375% and 2.875% respectively

So the 2018 and 2019 rate expectations are higher as the most dovish participants raise their dots...


Looking at the projections, we see further optimism, with unemployment forecasts in 2018, 2019 and 2020 declining to 3.6%, 3.5% and 3.5%, while Inflation finally rises from 1.9 and 2.0% in 2019 and 2020 to 2.1% and 2.1%. In other words the economy is expected to overheat modestly for 3 years!

The Fed also expects Fed Funds rates to rise from 2.1% to 2.4% in end 2018, and from 2.9% to 3.1% in 2019. The 2020 rate remains the same at 3.4%, and then fades back to 2.9% for the longer run.

The bias is clearly hawkish.

*  *  *

Ahead of today's FOMC decision, the market was pricing in 3.8 rate hikes in 2018 (that would be 1.8 more hikes after today's hike)...


But the market is also pricing a notable slowdown in the trajectory of rate-hikes next year...


Since The Fed last hiked rates, in March, Financial Conditions have eased...


The Dollar has soared since the last Fed rate hike, EM FX has collapsed, Treasuries are unchanged and stocks are marginally higher...


And perhaps most critically, the US yield curve has collapsed since The Fed hiked in March...


While a 25bps rate-hike is 100% baked into the cake - well why wouldn't it be, we're in the middle of a "global synchronous recovery" right? Oh wait!


And so don't show this chart to The Fed...

Because remember, they're raising rate for the right reason.


Finally for those wondering if the Fed raised the IOER by only 20bps as it hinted in the last minutes, the answer is yes: Fed governors voted unanimously to raise interest on excess reserves (IOER) rate to 1.95%, which is intended to foster trading in the fed funds market at rates “well within the FOMC’s target range,” according to the statement released Wednesday. Meanwhile the rate on the Fed’s RRP facility increased to 1.75% from 1.50%

*  *  *

Full Redline below:




SickDollar Wed, 06/13/2018 - 14:06 Permalink

Big time stagflation and the debt interest payments is going to go up big time

Trumpy get ready

the spread between the 10 and 30 year now is just 12.1 basis points


Obama = 8 years = FED raised it once!!!!
Trump= already raised 4 times!!!!!
You think the swamp doesn't have it out for Trump?


wwwww JLee2027 Wed, 06/13/2018 - 14:16 Permalink

National Economic Security and Recovery Act was a set of proposed economic reforms suggested during the 1990s by Harvey Francis Barnard. Barnard claimed that the proposals, which included replacing the income tax with a national sales tax, abolishing compound interest on secured loans, and returning to a bimetallic currency, would result in 0% inflation and a more stable economy. The proposals were never introduced before Congress.

Oh, yeah, that'll happen in a heartbeat./s

In reply to by JLee2027

bitzager BaBaBouy Wed, 06/13/2018 - 15:04 Permalink

Meanwhile FED keep forking out "Debt notes" to the people practically for Free, while playing Market/Casino Games... Since they hike rates logically Dullar should go UP to make it real FED unload about 20 Trucks of GOLD into f*cking crowd of BUYERS (if USD raising GOLD "should" drop), to make their "Logic" work in their theater... But in reality "Dollar a.k.a DEBT Obligation" just an IOU and GOLD don't give a f*ck about some stupid rates hike on some debt note...  LOL check it out!!! GOLD above 1300.. GAME OVER!!!

In reply to by BaBaBouy

bshirley1968 DownWithYogaPants Wed, 06/13/2018 - 19:33 Permalink

Hey, stupid, this is way bigger than your man-crush.  This problem has been building for some time and the end game intentions and results go WAY beyond the democrats vs. republicans bullshit.

If you can look at the world around you and the events unfolding and come to the conclusion that it is all about "GET Trump".  Then you truly are a head-up-you-ass idiot.

In reply to by DownWithYogaPants

Peter Pan BaBaBouy Wed, 06/13/2018 - 15:05 Permalink

The rate increase is overdue but at the same time incapable of reversing the damage the previous rate drops caused.

Interest rate adjustments on their own will not do the trick when the whole system is screwed.

Can someone tell me how this increase will overcome the massive student debt, credit card debt, demographic problems, a nation of pill poppers, a war machine that still needs to eat, the great wealth disparity etc etc?

In reply to by BaBaBouy

bitzager Peter Pan Wed, 06/13/2018 - 15:22 Permalink

The good thing about Debt, that it can be "canceled", if you know how... NOTES printed out of Thin air, recycles and disappear in the same manner... FED under obligation to pay your Bills (you just don't know it), since you are their employee and have no money to really payout anything and why you should, if CAR is belongs to the STATE and your HOUSE/LAND belongs to the FED as well as collateral.. I bet Your A$$ and Energy also collateralize.. The trick is: you cannot payout DEBT with another DEBT do you?

Basically you "PAY" for your house with DEBT NOTES,which means, you paid NOTHING, so technically FED still own your house, that's is why you are paying TAXES on it...

In reply to by Peter Pan

mailll bitzager Wed, 06/13/2018 - 19:05 Permalink

Of course that is why people have always said the solution is for the US govt. to print money (up the balance sheet) as the economy demands, not the fed where it has to be paid back.  It's all a twisted money and control game.  But it is only temporary.  Righteousness will prevail and hopefully we will see it in our lifetime.

But right now we're stuck with running the world economy on borrowed money.  If this ceases, so does the world economy.

In reply to by bitzager

LotUnsold wwwww Wed, 06/13/2018 - 14:35 Permalink

What does "abolishing compound interest" mean here?  I don't see how you can do that.  You can quote, or advertise, everything as "flat" but people are still going to calculate the Yield/APR/IRR, so they can know what's going on.  Yield calculations are one of the great advances in banking.  You can't just put it away in a cupboard any more that you can just forget about the internal combustion engine and go back to horses.

In reply to by wwwww

JohnGaltUk SickDollar Wed, 06/13/2018 - 14:24 Permalink

Trump has the elites on the run, they are busy trying to hide all the kiddies.

Saudi Arabia = sorted, Syria = sorted, NK = sorted, Iran ready to get on board the Trump train soon.


False flag Hawaii stopped, soon the mass arrests will start happening and their property will be confiscated and returned rightly to the USA citizens.

In reply to by SickDollar

JohnGaltUk pods Wed, 06/13/2018 - 15:47 Permalink

It's  happening now, cleaning out all the rotten players in the DOJ, FBI,NSA and the bad judges.

The Trump presidency is a military OP. Join the dots, the Mueller investigation is a soft coupe by the cabal, he has not even been seen with a black Russian drink in his hand. Have you not noticed how many senators are not seeking re-election or are retiring. Have you not noticed how many big CEO's are retiring or resigning. Crooked Pelosi and McCabe developing health issues. Why are there so many sealed indictments? Do you not keep track of POTUS EO's. Why is he upgrading GITMO?

Remember the false flag in Hawaii, check out how many air force planes have been involved in "accidents " in the past year and how many navy ship "crashes" have happened.

Trump and the cabal are slogging it out. Saudi Arabia rounded up all the princess and took their money, now some young guy is running the joint - sorted, Syria = sorted, NK= sorted, Iran he is working on that now. Coincidence? I don't think so, the cabal is on the run and soon you will see Hillary, Obama, Soros and Rothschilds in orange jump suits. The players are international so I expect some seal operations. Anyone who has stolen from the USA.

You know what the say in the Bronx; pay backs a bitch. Trump has given the world front row tickets so enjoy the show.

In reply to by pods

Glowbar Wed, 06/13/2018 - 14:17 Permalink

Wish they'd just come out and say the real reason they're continuing to raise rates is to try and stave off the next crisis. The Pension Crisis. Unfortunately, that one's already baked in the cake.

Kurpak Wed, 06/13/2018 - 14:17 Permalink

The fed thinks it can surf the rim of the black hole without getting sucked in..

until one of those engines goes offline unexpectedly. oops