BNP said they see data likely to be disrupted by the hurricanes, and the uncertainties surrounding the inflation outlook are unlikely to be resolved before the December Federal Reserve meeting, but the “committee is sending a fairly strong signal that they could look through the data disruptions as the majority continue to expect one more hike this year,” they said.
Admittedly, BNP said they feel nervous about their forecast for the Fed to remain on hold until March 2018, and will be closely monitoring incoming data. They also said that for 2017 and 2018, while the median dot did not fall, the hawks dropped their expectations a bit, as they did for 2019, when they believe the median rate will decline 25 basis points.
With the difficulty to parse out the trend in data on the back of the hurricane impacts, BNP thinks there is a good case for the FOMC keeping rates on hold for the remainder of the year. The September statement has left the door for a December rate hike very open. The risk is that the Fed looks through the data disruptions and with prices rising as a result of the hurricane disruptions, they deliver another 25-point rate hike at the end of the year.