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Inside the September FOMC Meeting: Key Updates

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Sep. 21 2017, Updated 5:46 p.m. ET

FOMC members favor a December rate hike

The FOMC (US Federal Open Market Committee) meeting that concluded on September 20 left many market participants surprised. The Fed maintained its target interest rate range at 1.00%–1.25% and has announced that the balance sheet shrinking program will begin in October.

The surprise, however, came in the hawkish tone in the Fed’s statement, which signaled the possibility of another rate hike before the end of this year. The Fed’s dot plot remained unchanged after this latest meeting, which means that another rate hike is still possible this year.

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11 Fed members see another rate hike this year

According to the FOMC post-meeting statement, 11 members foresee another rate hike this year. In the June FOMC meeting, only seven members were in favor of an additional rate hike this year. This increased optimism was backed by the moderate US economic growth since the last meeting.

Fed Chair Janet Yellen mentioned the lagging inflation (TIP) in recent months and said that it could pick soon. She said that the lower levels of inflation (VTIP) were transitory and US economic growth trends remain strong, leading markets to believe that there could be another hike in the December meeting.

This surprise hawkish tone led to a sharp rise in bond yields and the US dollar after the press conference.

In this series, we’ll discuss the details of the latest FOMC meeting and how the statement has impacted the equity (SPY), currency (UUP), and fixed income (BND) markets.

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