Tim Duy, Columnist

Fed Would Surprise Markets If It Stays Hawkish

Inflation weakness should compel the central bank to take a dovish tack.

September 19, 2017 at 5:05 PM UTC

Tim Duy is a professor of practice and senior director of the Oregon Economic Forum at the University of Oregon and the author of Tim Duy's Fed Watch.

Dove on the wing.
Photographer: Dimitar Dilkoff/AFP/Getty Images

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The Federal Reserve meeting this week will likely end with unchanged policy rates and the initiation of balance-sheet normalization. Market participants widely expect these outcomes, so they will come as no surprise. The real action in this meeting will come from the Fed’s description of the economy, the quarterly economic projections and Chair Janet Yellen’s press conference. The totality of the commentary should lean dovish as the Fed expresses concerns about the inflation outlook. The surprise would be a Fed that still leans more heavily toward the hawkish side of policy spectrum.

Consider the Fed’s economic projections (median of central tendency) from June in comparison with the latest values: