Morgan Stanley's Zentner Sees Three Fed Hikes in 2018

The transcript discusses the Federal Reserve's expectations and strategies regarding interest rate hikes. Initially, the Fed anticipated one rate hike in 2015 and 2016, but now expects three hikes in 2017 and 2018. Despite low inflation, the Fed maintains a gradual rate increase approach to prevent an overheating economy. The FOMC statement surprised markets by lowering inflation forecasts while reinforcing the plan for rate hikes. The Fed's dual mandate aims to tighten financial conditions to slow economic growth, not just target inflation. Achieving the 2% inflation goal remains challenging, with the Fed emphasizing a symmetric approach to inflation targets.

What does the Fed believe about the relationship between rate hikes and the economy's potential?

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Why is the Fed maintaining a gradual pace in raising rates?

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