Fed delays rate hike yet again

Despite raising its GDP growth and core inflation forecasts for this year and lowering its unemployment rate forecast for this year, the Fed opted to leave its key policy rate unchanged at 0.0% to 0.25% today. As far as our own forecasts are concerned, we now expect the fed funds rate to end this year at between 0.25% and 0.50% (i.e. just one 25bp hike). But it is not implausible that some other "risk" will emerge over the next few months (the debt ceiling is the most obvious candidate) that will convince the Fed to delay even longer.