Fed plays for time with dovish hike

The 25bp rate hike and new projections unveiled by the Fed today were towards the more dovish end of potential outcomes. Despite recent strong economic data, officials acknowledged the likely hit from the banking sector turmoil and left their end-year projection for the fed funds rate unchanged at 5.1%, implying only one more 25bp hike from here. Nevertheless, with the crisis making us more confident that the economy will fall into recession soon, we suspect the Fed will be cutting rates again before long.