The Fed Remains Dovish

| Multi-Asset

The Fed Remains Dovish_chart website

Source: Unigestion, US Federal Reserve, as of 25 June 2021.

Despite the change in dot projections in the June meeting, the Fed’s stance remains largely dovish. Our analysis shows that for Fed rates to rise or taper, the board needs dovish members to converge toward hawkish ones on macroeconomic forecasts.

The chart compares minimum, maximum and median two-year forward dot projections with Fed rates. It shows that in the previous tightening cycle, between 2015 and 2018, the minimum rate projection, reflecting expectations from dovish members, had moved much more than the maximum, reflecting the hawkish members.

This finding highlights the role and importance of dovish members for reaching a consensus to adjust monetary policy. Reflecting this, since the implementation of dot projections and guidance, Fed rates have closely followed minimum dot projections, highlighting just how accommodative the Fed’s stance has been over the period.

Important Information

The information and data presented in this page may discuss general market activity or industry trends but is not intended to be relied upon as a forecast, research or investment advice. It is not a financial promotion and represents no offer, solicitation or recommendation of any kind, to invest in the strategies or in the investment vehicles it refers to. Some of the investment strategies described or alluded to herein may be construed as high risk and not readily realisable investments, which may experience substantial and sudden losses including total loss of investment.

The investment views, economic and market opinions or analysis expressed in this page present Unigestion’s judgement as at the date of publication without regard to the date on which you may access the information. There is no guarantee that these views and opinions expressed will be correct nor do they purport to be a complete description of the securities, markets and developments referred to in it. All information provided here is subject to change without notice. To the extent that this page contains statements about the future, such statements are forward-looking and subject to a number of risks and uncertainties, including, but not limited to, the impact of competitive products, market acceptance risks and other risks.

Data and graphical information herein are for information only and may have been derived from third party sources. Although we believe that the information obtained from public and third party sources to be reliable, we have not independently verified it and we therefore cannot guarantee its accuracy or completeness. As a result, no representation or warranty, expressed or implied, is or will be made by Unigestion in this respect and no responsibility or liability is or will be accepted. Unless otherwise stated, source is Unigestion.

Past performance is not a guide to future performance. All investments contain risks, including total loss for the investor.