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Most market players expect the Federal Reserve to raise interest rates by a quarter percentage point this week, the eighth increase since December 2015. Despite rumors that the central bank could slow down its summary of economic projections would be modest, they would probably reveal a more hawkish tilt.
There are two central questions. The first is the performance of the US economy compared to expectations? I do not think anyone at the Fed believes his performance is below normal. In fact, Loretta Mester, president of the Cleveland Federal Reserve, estimates that the economy is more dynamic than expected, with growth around 3 points. According to the Federal Reserve Bank of Atlanta, the third quarter could be a repeat of the second with growth exceeding 4pc.
The fact that no one will probably see its growth forecasts again, while some may revise them upwards, means that the risk is weighted upward in the median projection of GDP. I expect internal factors to prevail for the moment over international concerns. In addition, a surprise upward forecast of GDP suggests the possibility of a lower estimate of the unemployment rate. Wages increased by 2.9 pc in August, a record high for the current round, and reinforce the view that the economy is functioning at full employment and beyond. The risk is now that the Fed's message is rather hawkish, including an upward trend in the weakest rate forecasts that does not necessarily imply an acceleration of increases, but a heightened confidence in the fact that in 2019.
Bloomberg
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