Sonia Meskin, US Economist at Standard Chartered, suggests that what the Fed will do in 2019 hinges on how the economy and financial conditions evolve.
“This week, the Fed will have multiple opportunities to provide an updated outlook on both: Vice Chair Clarida will speak on 27 November and Chair Powell on 28 November; November meeting minutes will be released on 29 November and NY President Williams will speak on 30 November.”
“We do not believe that global growth concerns, a slide in energy prices and financial-market gyrations have altered the Fed’s central outlook, or slackened its commitment to the Summary of Economic Projections (SEP).”
“US Economic momentum remains robust; it would take a pronounced slowdown (likely, persistently low energy prices or an external shock) for 2019 real growth to undershoot SEP forecasts. But we think the FOMC is concerned about two issues: immediate-term, Committee members are worried about having inadvertently engineered a financial market ‘tantrum’ akin to the one in 2013; medium-term, they are concerned about a more pronounced China slowdown.”
“We expect both these worries to come through in their communication this week, but we would not conflate this with a change in the Fed’s reaction function, or a call for a fundamental reassessment of the Fed’s policy stance.”