Danske Research Team
Danske Bank A/S
As expected, the Fed funds target rate was unchanged at 0.25%-0.50%. The vote was unanimous. The statement was dovish and more or less in line with our expectations.
Overall, the statement supports our view that Fed will also skip March, although the Fed is keeping the doors open.
The main change in the statement was that Fed is no longer 'reasonably confident' that inflation will reach 2% in the medium-term.
As expected, the Fed reinstated that it is 'monitoring global economic and financial developments'. Fed also worried about the fall in market inflation expectations.
We stick to our view that the Fed will increase the Fed funds target rate three times this year (April, September and December). However, we still believe there are downside risks to this call as Fed will not risk tightening too much, too quickly, in our view.
Markets have still priced in one full hike this year and one next year.
Overall, the statement supports our view that Fed will also skip March, although the Fed is keeping the doors open.
The main change in the statement was that Fed is no longer 'reasonably confident' that inflation will reach 2% in the medium-term.
As expected, the Fed reinstated that it is 'monitoring global economic and financial developments'. Fed also worried about the fall in market inflation expectations.
We stick to our view that the Fed will increase the Fed funds target rate three times this year (April, September and December). However, we still believe there are downside risks to this call as Fed will not risk tightening too much, too quickly, in our view.
Markets have still priced in one full hike this year and one next year.
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