The median dot plots for 2019 was unchanged from March but it masks a more dovish stance by policymakers
The latest median dot plots from the FOMC meeting yesterday revealed no change for 2019 with downward revisions to the 2020 and 2021 projections. However, the devil is always in the details when it comes to stuff like this.
In March, 11 FOMC members viewed that the rates should stay around 2.375% this year with 6 members believing that it should be higher than that. As of yesterday, only 8 members held the view that rates should stay around 2.375% this year (1 above) while 8 other members were of the view that rates should be lowered (with 7 projecting two rate cuts).
That means that all it needed was just one additional member from the steady group to lower their projection and it would've skewed the median lower. That belies the so-called unchanged projection to the 2019 median dot plots.
Regardless, the message from the Fed is loud and clear. Unless inflation miraculously improves and a trade war can be averted, rate cuts are coming.
Given the shift in sentiment by Fed officials, it is helping to justify the current market pricing of roughly three rate cuts this year and one more next year by the middle of next year. Or at least, it gives out the notion that it may not necessarily be a "one and done" thing and that'll be enough for markets to chew on right now.
The dollar is continuing to be beaten up today as a result and unless inflation and trade developments improve over the coming weeks, it may be tough for the greenback to find some reprieve in the near-to-medium term.
The bright side in all of this? Markets have already fully priced in a rate cut for July, two rate cuts by October, and three rate cuts by March 2020. So, unless there is an argument for the Fed to cut rates by 50 bps in one go - which I don't see for the time being - then further downside may also be rather limited.
