Fed may be preparing market for significant shift in dot plots in December - ANZ

"Fed’s Williams adopted a softer, data-dependant tone overnight, consistent with recent comments from a range of Fed speakers," note ANZ analysts.

Key quotes

"He said that the economy is strong and creating lots of jobs and that the Fed will likely raise interest rates “somewhat” further. However, he stressed that policy was not on a pre-determined course and that the interest rate path will be adjusted if needed. The Fed is still widely expected to increase rates for the fourth time this year in December, but market pricing has slid from the 80% probability priced in during mid-October to 67% priced in currently."

"It appears that the Fed may be preparing the market for a significant shift in the dot plots in December, with the path for rate hikes through 2019 looking more uncertain. Previous guidance from the Fed has been for three more hikes in 2019, while the market is currently pricing in almost two more hikes. ANZ expects the Fed will raise rates in December then only once more in mid-2019."