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UBS: FOMC Decision Reflects Lack Of Consensus

FED
  • The FOMC "mostly provided" UBS's expected outcome for the September meeting of a shift of fwd guidance to indicate that policy was on hold until inflation was overshooting 2%, w no reading on unemp rate as a trigger to hike. But the Fed was vague, not tying to the realized level of inflation but rather their own forecast for inflation.
  • However, UBS's expectation that the FOMC would extend duration of QE purchases at this meeting was "wrong" – though because "this lever of policy is one of the few the FOMC has left, and we still expect them to deploy it by the end of the year".
  • Powell's statement that the Fed has a lot more tools, and their expectation to miss on both aspects of their objective for three years, are hard to reconcile. UBS suspects "a lack of consensus resulted in action that was not fully coherent." The 2 dissents reflect a lack of cohesion.
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