**MNI POLICY: Fed Hikes; Projects 2 More Increases in 2019>

--Judges 'Some Further Gradual Increases' Needed

--Economy, Labor Market Stayed 'Strong' 

--Rates Projected to be Modestly Restrictive by End-2019

By Jean Yung

     WASHINGTON (MNI) - The following are the key points from the 

FOMC statement released Wednesday:

     - FOMC raised the target range of the fed funds rate to 2.25% to 

2.5% on a unanimous vote, as expected, again citing "strong" economic 

activity and "strong" job gains. IOER was raised to 2.40%, 10 bps below 

the top of the target range. 

     - Median projection for 2019 fell to two hikes from the three seen 

in September, which would take rates to 2.9% by the end of the year. At 

that point, rates would already be modestly restrictive, as the longer 

run level for the fed funds rate was revised down to 2.8% from 3.0% in 

September. Now no officials expect to hike more than three times next 

year, down from five in September. 

     - Officials' projections for the fed funds rate also drifted lower 

over the medium term, taking the median forecast for 2020 and 2021 

to 3.1%, compared to 3.4% in September. 

     - Rather than completely rewriting its forward guidance, the FOMC 

tweaked it to say "the Committee judges that some further gradual 

increases" in the fed funds rate would be needed. Adding the word "some" 

signals that the number of increases may be more limited at this point, 

while adding the word "judges" nods to humility in the face of economic 

developments. 

     - FOMC injected the word "judges" in its assessment of the balance 

of risks as well, saying it "judges that risks to the economic outlook 

are roughly balanced" rather than risks "appear" to be roughly balanced. 

     - Officials added that they will continue to monitor "global 

economic and financial developments" as they pertain to the economic 

outlook, signaling they are watching the recent market turmoil as well 

as ongoing uncertainty over global growth and trade policy. 

     - The Fed's forecasts for core inflation weakened slightly over the 

medium term to 2.0%, compared to 2.1% in September. Headline inflation 

is expected to be slightly weaker in 2019 as well, at 1.9% before rising 

to 2.1% in 2020 and 2021. 

     - On the other hand, the economy's growth potential was revised up 

a tenth, to 1.9%. Growth is projected to slow faster than previously 

thought next year, but will still come in above potential through 2020, 

after which it drops to 1.8% in 2021. 

     ** MNI Washington Bureau: 202-371-2121 ** 

[TOPICS: MMUFE$,M$U$$$,MAUDR$]