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UBS saw the September FOMC minutes out Wednesday as pointing to a more aggressive dot plot in the December meeting's projections (if UBS's inflation expectations are met, that is). UBS sees a full hike in the 2022 dots (vs 1/2 a hike in last month's projections), and 4 total through 2023 (vs 3 1/2 prior).

  • They note: "there is still a sizable group that is concerned about the inflation outlook. In particular, "many" participants noted the substantial rise in some survey-based measures of inflation expectations. Given these concerns, the sharp downward move in the unemployment rate in September, and our view that inflation will surprise the Fed to the upside during the remaining part of the year, we expect that the dot plot in December will show a more hawkish distribution"
  • Also of interest to UBS was the active debate on the labor market participation rate, with "various" members thinking that a return to pre-pandemic levels is unlikely, but "a number of others" seeing it return to/exceed those levels.
  • "We think that this debate is one of the drivers behind a divided view on potential 2022 hikes", writes UBS, so a "material" rise in the participation rate as they expect in 2022 will give more arguments to hike.