Despite rising core inflation and falling unemployment, the Fed stays on hold, and lowers their outlook for rate hikes in 2016, notes UBS.
"Lower for longer, but same pace once they really get going As expected, the Fed left rates on hold (Kansas City Fed President George dissented). Within their discussion of the outlook, they dropped references to inventories while noting weakness in business investment.
They took pains to note that "global economic and financial developments continue to pose risks" despite dropping language suggesting they were "closely monitoring" these developments, UBS adds.
"The move to just two rate hikes in 2016 is consistent with UBS's view that the Fed will hike rates just two times this year – in September and December – before hiking rates four times in 2017 (the 2017 view is also consistent with our outlook)," UBS projects.
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