**MNI POLICY: Fed Hikes, Reaffirms Gradual Tightening Path>

--Removes 'Accommodative' Characterization; Only Change to Statement 

--Continues to See Dec Hike, 3 More in 2019, 1 in 2020, None 2021

--Neutral Rate Estimate Rises to 3.0% vs 2.9% in June

By Jean Yung

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

FOMC statement released Wednesday:

     - The FOMC raised the target range of the fed funds rate to 2% to 

2.25% on a 9-0 vote, as expected, citing "strong" economic activity and 

"strong" job gains. IOER was raised to 2.20%, 5 bps below the top of the 

target range. 

     - The FOMC further consolidated around a December hike with 12 of 

16 officials penciling in rates in the 2.25%-2.5% range by year-end. 

The rest saw no need for another rate hike this year. 

     - The statement was unchanged except to remove the sentence in the 

third paragraph in which the Fed characterizes monetary policy as 

"accommodative." Officials in August noted that policy was moving closer 

to the range of estimates of its neutral level, meaning the 

"accommodative" language was growing stale. 

     - Officials remain split on the outlook for 2019, though the median 

continued to point to three hikes. Nine of 16 officials are forecasting 

three or more hikes next year, while seven consider two or fewer hikes 

appropriate (assuming they hike rates in December). That's roughly the 

same split as in June.    

     - Officials expect rates to reach 3.4% in 2020 and stay there in 

2021, four-tenths above their estimate of the longer run fed funds 

rate, which was marked up a tenth to 3.0% compared to June. A majority 

of the committee (10 out of 15) estimates the longer run neutral rate to 

be between 2.75% and 3%. 

     - Officials marked up growth forecasts for this year and next, 

while forecasts for unemployment and inflation were roughly unchanged. 

They now expect the economy to grow at 3.1% this year, up three-tenths 

from June, and at 2.5% next year, up a tenth. The Fed predicts headline 

inflation will run slightly above its target rate of 2% through 2021, at 

2.1% each year except for in 2019, when it dips to 2.0%. The 

unemployment rate is projected to fall to 3.5% by the end of 2019 before 

rebounding to 3.7% in 2021. 

     - Risks to the outlook are still "roughly balanced." Nothing in the 

statement suggested officials were worried that President Trump's 

tariffs had made enough of an impact on the data to merit a mention.  

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

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