(25 MAY 2018)DAILY MARKET BRIEF 1:Importance of the next US Federal Open Market Committee Meeting

The US Federal Open Market Committee 12-13 June meeting will be critical. Not only will there be a decision on policy strategy, but Summary of Economic Projections and a press conference by Fed Chair Powell. It's universally expected the Fed will hike rates by 25bp at this meeting, to be followed by two additional hikes in September, bringing the total for 2018 to three. In light of US economic outperformance, after a slow 1Q, there's been a growing expectation of tighter monetary policy. In response, US yields have rallied with 10-year yields climbing above 3.0%, with the USD benefiting from the higher interest rate. Yet, in recent meeting minutes, the Fed gave no indication that they would increase the pace of tightening. Instead they indicate a willingness to allow the inflation rate to rise above 2% for a "temporary period," while the economy continues to grow.

By Peter Rosenstreich