<p>Three quick thoughts on the March Fed meetingled by Chairman Jerome Powell.</p><p><strong>1) Confident Powell</strong></p><p>Fed Chairman Powell delivered a news briefing that is short and sweet. The press conference lasted 45 minutes, shorter than his predecessor Janet Yellen. Many questions were addressed, and Powell provided concise answers in contrast to Yellen’s elaborate responses. He avoided the debate on number of rate hikes and emphasized the main decision of 25bps rate hike in this meeting.  Powell also signalled the possibility of more press briefings in the future. The confident appearance demonstrate the smooth leadership transition from Yellen. All is well with the Fed. </p><p><strong>2) Hawkish lift in median plot</strong></p><p>The Fed deliver a 25 bps rate hike and increase Fed Fund rate to 1.5 – 1.75% range. The median dot plot for 2018 remained the same at 2.125%.  However, the path of rate hikes was steepened with Fed Fund rate raised to 2.875% and 3.375% for 2019 and 2020 respectively.</p><p>Digging deeper, the picture is more hawkish. The number of participants expecting more rate hikes jumped. For 2018, 7 participants (vs 4 previously) expect at least four rate hike this year; 6 participants anticipate Fed Fund rate to be 2.375% by end of 2018.  For end-2019, 6 participants expect the Fed Fund rate to be above 3%, an increase from 4 participants previously. The unchanged dot plot for 2018 could initially disappoint bond bears as they were expecting more after hawkish remarks by Powell prior to the meeting. However, the number of participants expecting more rate hike this year still leave the room for four rate hikes to happen this year.</p><p><strong>3) Bullish economic outlook</strong></p><p>The Fed believed tax cuts could strengthen the US economy. Economic growth and inflation are revised higher with GDP growth and core Personal Consumption Expenditure price index for 2019 expected to be at 2.4% and 2.1% respectively. The employment market is expected to stay robust with unemployment rate expected to be at 3.6% next year. The upward revision in economic outlook is bullish and could add fuel for more rate hikes this year.</p><p><strong>Edmund Chan, CFA</strong></p><p><strong> </strong></p>