Fed is likely to signal just one more rate hike – Danske Bank


Danske Bank analysts are expecting that the US Fed will likely keep the target range unchanged at 2.25-2.50% and make no major changes to the statement in its forthcoming meeting this Wednesday.

Key Quotes

Powell & Co have emphasised that they will be " patient" in raising hikes but the question is what that means in terms of the "dots" , which are released alongside the rate decision.”

We expect Fed to lower its 'dot' signal further to just one rate hike in 2019 (down from two) . We expect them to be revised lower also for 2020 and 2021 and we will not be surprised if the Fed signals "one and done". We expect the longer-run dot is to be unchanged at 2.75%. That said, Fed has begun downplaying the importance of the dots given the increased uncertainty around the base case, so be careful putting too much weight on them going forward.”

Our current base case is two Fed hikes (in June and December) based on our overall positive economic outlook. Economic growth is strong, unemployment rate is moving lower, wage growth is moving gradually higher and risk sentiment in markets has rebounded. PCE core inflation, however, has softened in recent months. However, if the Fed confirms it has changed its reaction function by looking more at inflation expectations and less on the unemployment rate, a June hike seems less likely, as marked-based inflation expectations remain well below historical average.”

“Still, markets are pricing the Fed too dovish at the moment , as they think the Fed is on hold for the rest of the year. A change in Fed's rhetoric can happen fast. A good example is the rate increase in March 2017 where the market was not expecting a rate hike until Fed signalled it three weeks in advance.”

We believe the Fed will announce it will end shrinking its balance sheet in Q4.”

 

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended content


Recommended content

Editors’ Picks

AUD/USD struggles near multi-month low; awaits US CPI before the next leg down

AUD/USD struggles near multi-month low; awaits US CPI before the next leg down

AUD/USD enters a bearish consolidation phase near a multi-month low touched on Tuesday as traders await the release of the US CPI report, due later today, for cues about the Fed's rate-cut path and before placing fresh directional bets. 

AUD/USD News
USD/JPY eases from two-week low; downside seems protected ahead of US CPI

USD/JPY eases from two-week low; downside seems protected ahead of US CPI

USD/JPY stalls a two-day uptrend near a technically significant 200-day SMA and trades with a mild negative bias just below a nearly two-week low touched Tuesday. A stronger Japan PPI report keeps the door open for a December BoJ rate hike and supports the JPY. 

USD/JPY News
Gold price looks to build on momentum beyond $2,700 ahead of US CPI report

Gold price looks to build on momentum beyond $2,700 ahead of US CPI report

Gold price sticks to its positive bias for the third straight session and advances to over a two-week high on Wednesday. Geopolitical tensions and the resumption of buying by China’s central bank for the first time in seven months act as a tailwind for the XAU/USD. 

Gold News
Ripple's XRP breaks out of downtrend as RLUSD receives greenlight from New York regulators

Ripple's XRP breaks out of downtrend as RLUSD receives greenlight from New York regulators

Ripple's CEO Brad Garlinghouse announced on Tuesday that the company received a green light from the New York Department of Financial Services on the launch of its stablecoin RLUSD.

Read more
How the US-China trade dispute is redefining global trade

How the US-China trade dispute is redefining global trade

Since Donald Trump took office in 2017, trade flows and market shares have changed substantially. We think that shift is set to continue under looming tariffs and a new protectionist environment.

Read more
Best Forex Brokers with Low Spreads

Best Forex Brokers with Low Spreads

VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.

Read More

Forex MAJORS

Cryptocurrencies

Signatures