The Fed did not hike in June. Unlike the last two meetings when there were dissents in favor of a hike, the vote was 10-0.

The median projection is still two hikes this year, but six Fed members see only a single hike, up from a single person last meeting.

Meanwhile, the market see zero hikes for the year.

Policy Unchanged, Lower Prospects of Hikes

The Wall Street Journal reports Fed Leaves Policy Rate Unchanged, Lowers Outlook for Increases.

The Federal Reserve held its benchmark lending rate steady on Wednesday, and officials lowered projections of how much they expect to raise short-term interest rates in the coming years.

New projections show officials expect the federal-funds rate to rise to 0.875% by the end of 2016, according to the median projection of 17 officials. Their forecasts imply they see two rate increases this year. In March, only one official saw one rate increase this year and seven saw three or more. Now, six officials see one increase this year, and only two see three or more.

The central bank also sees the fed-funds rate at 1.625% by the end of 2017 and 2.375% at the end of 2018, lower than quarterly projections officials released in March.

The Fed indicated its views about risks to the economy haven’t shifted much since April. As they said then, officials said they would “closely monitor” inflation indicators and global economic and financial developments. That isn’t a strong endorsement of the outlook. At moments of more confidence, as in December when the Fed raised short-term interest rates by a quarter percentage point, the Fed said risks to the economy were balanced.

The Fed slightly reduced its estimate for how much economic output will expand this year, shifting its March projection of 2.2% output growth to 2%. It also nudged down its 2017 growth projection by one 10th of one percent to 2%.

Ahead of Wednesday’s release, futures markets put 1.9% probability on a rate increase in June and a 20.6% probability on a move in July. They saw just a 16% probability of two or more rate increases by December.

Ms. Yellen won a unanimous vote. Kansas City Fed President Esther George, who dissented in March and April in favor a rate increase, instead voted with the majority.

Implied Rate Hikes

Fedwatch 2016-06-15

The market see roughly a 50-50 chance of one hike this year, but not until December. Odds of a December hike did improve from yesterday, but they still remain slightly under 50%.

With the pathetic industrial production number today (See Industrial Production Declines 7th Time in 10 Months; Just Manufacturing?), not even a strong jobs report will likely save a July hike.

Addendum

It appears the rate hike odds table is before Yellen started yapping. Odds of a hike just collapsed. See Rate Hike Odds Update: December Odds Just Crashed to 24.2%, Cut Odds 4.9%.

Mike “Mish” Shedlock