The research team at Westpac explains that at its March meeting, the FOMC went ahead with a well telegraphed rate hike, the third in this cycle and today, market participants will be looking for any further guidance in the timing of changes to their other policy lever or the size of the balance sheet.
“With full employment having been attained; job and income growth continuing; and inflation near enough to target, there was no cause to delay – particularly given political developments may force them to stay their hand in the future.”
“The May meeting will not see a follow-up hike. To our mind, that will need to wait until June. However, market participants will be on the look out for any further guidance in the timing of changes to their other policy lever, the size of the balance sheet. Currently, expectations are centred on a December announcement and January 2018 commencement of balance sheet normalisation.”