- US equities fluctuated and then closed 0.3%-0.4% lower, partly due to increased uncertainty on tax reforms. Yesterday afternoon, Republican Senator Rubio noted he intends to oppose the tax bill as written unless there was a larger child tax credit (currently $1,100). He said GOP leaders “found the money to lower the top (individual tax) rate”, but “can’t find a little bit” more to help working class parents raising children. Although later on, President Trump said he is “very sure” Rubio will vote yes.
- The Fed raised rates by 25bp as expected, on a 7-2 vote with both the Fed’s Kashkari and Evans dissenting. The market seems to have taken a slightly dovish take on the FOMC with 10y treasury yields lower and the US dollar index down 0.71% for the day. In the details, the Fed now projects the labor market to remain strong with a lower unemployment rate of 3.9% and stronger GDP growth across the forecast horizon, particularly next year where growth is expected to be 2.5% (vs. 2.1% previous), in part due to the expected tax plans. Despite these positive revisions, the Fed’s forecast for core inflation and the dot plots are unchanged, with median expectations of three more hikes in 2018 and CPI of 1.9% in 2018 and 2.0% in 2019 & 2020.