On balance, we still think that the Fed will raise rates twice in the opening six months of 2019, taking the fed funds target range to between 2.75% and 3.00%. The renewed weakness of core inflation could prompt the Fed to move to the side lines a little earlier next year. At the same time, however, the resilience of the domestic real activity data suggest that the slowdown in real growth might be more gradual than we have assumed, in which case the Fed could squeeze in three rate hikes next year before calling it quits.
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