Goldman: FOMC Meeting: Hawkish Or Dovish?

Goldman Sachs note that “although yields declined sharply following the Chair Powell’s post-meeting press conference, we did not view the outcome of the meeting as particularly dovish.”

• “Our economists note that the implications for the Fed’s path this year actually leaned a bit hawkish on the margin, particularly Powell’s optimism on growth despite recent weakness in survey data and his observation that doing ‘too little’ was the more difficult risk to manage.”
• “In our view, however, the overall message appeared consistent with our baseline for two more 25bp hikes in March and May, and no cuts through the rest of the year. Although some of the post-FOMC price action reversed following a strong jobs report, the deep inversion through next year persists.”
• “It is likely the result of overweighting recession odds relative to our expectations, and underestimating residual stickiness in inflation, alongside the assumption of a low ‘neutral rate,’ all of which we think will correct over time. On the last point, the Fed is complicating the issue for itself by leaving its long run nominal rate projection largely unchanged at 2.50%; we’ve documented previously that investors appear to place some weight on these projections when settling on medium term forward rates.”