/STOCKS: DB analysts said on Fed............>

US TSYS: /STOCKS: DB analysts said on Fed tightening that "whoever said the

journey matters more than the destination probably wasn't a Fed watcher. Despite

four rate hikes and imminent balance sheet reduction, investors appear sanguine.

In fact, financial conditions have become easier. Why? Investors believe the

Fed's final destination is already within sight. Market pricing expects the

funds rate to stay below 2%. The Fed dots, so far, forecast a 3% endpoint, down

from 4% three years ago."

- They add "the disagreement stems from the prognosis for r*, the unobservable

neutral real rate which delivers potential output and stable inflation. The Fed

assumes this will rise from 0% to 1%, while investors don't. In previous cycles,

however, the funds rate peaked at least one per cent above r* plus inflation. A

3% funds rate is possible even with the r* at zero."