Fed on hold for the foreseeable future - Wells Fargo

After taking a “patient stance” yesterday, analysts at Wells Fargo, still see possible two rate hikes from the Federal Reserve during the current year. 

Key Quotes: 

“The decision to keep rates on hold had been widely expected by the market because most FOMC members had been indicating in recent public comments that the committee likely will be on hold for the foreseeable future as it watches incoming economic data.”

“The Fed is on hold for the foreseeable future. Indeed, the FOMC can afford to be patient because PCE inflation (the Fed’s preferred measure of consumer price inflation) is running at its target of 2%. So what is the next move for the fed funds rate? Will the Fed eventually hike rates again, or will it reverse course and cut rates? Or will it be on hold for an indefinite period of time? In our view, another rate hike is the most likely outcome. We forecast that real GDP will grow at an annualized rate between 2.0% and 2.5% in coming quarters. If that forecast is reasonably close to being correct, then the unemployment rate, which is already near a 50-year low, likely will continue to trend lower, putting some upward pressure on wage inflation.”

“We judge that the FOMC will opt to tap on the brakes again (i.e., raise rates by 25 bps) this summer and again at the end of the year. We then look for the Fed to remain on hold through much of 2020.”