In accordance with changes in the economic outlook, the updated interest rates projections show that the "leadership", as proxied by the average of the 4-6 dots, modestly lowered the pace of the hiking cycle.
"The fed funds rate is now expected to rise to 1.125% by year-end 2016, compared with 1.375% at the June meeting, implying roughly three hikes in 2016, compared with four earlier", says Barclays.
Further, the long-run projections were also modestly lowered to 3.25% from 3.5%. Needless to say, the market continues to trade through these forecasts with fed fund futures now pricing in the Fed to hike to 0.8% by year-end 2016 and 1.35% by year-end 2017.
"The discrepancy mainly reflects the difference in the inflation outlook. The CPI swap market is pricing in little acceleration in inflation whereas the Fed expects y/y core PCE to rise from current 1.2% to 1.7% by yearend 2016 and 1.9% by year-end 2017", added Barclays.