Fed: On the path of normalisation - TDS

Sandeep Kanihama FXStreet Contributor

Michael Hanson, Head of Global Macro Strategy at TD Securities, points out that following the June FOMC meeting, they have revised their Fed call for two more hikes this year — adding December to their expectation for September — and now have one hike per quarter next year as their base case.

Key Quotes

“This path would bring the upper bound of the fed funds target range to 3.25% by September 2019, slightly above our expectation for a 3% FOMC median estimate of the neutral rate.”

“The case for hiking beyond neutral is compelling: unemployment will be well below the NAIRU, GDP growth well above potential, inflation modestly above target, and financial conditions likely more supportive than three-plus years of removing accommodation would normally suggest.”

“There are several downside risks on the horizon, including slowing global growth, emerging market volatility, and trade wars.”

“We expect a data-dependent Fed to look past these external shocks unless they clearly spillover into the US data, as conditions are less fragile and policy normalization is further along than in 2015-2016.”

Author

Sandeep Kanihama

FXStreet Contributor

Sandeep Kanihama is an FX Editor and Analyst with FXstreet having principally focus area on Asia and European markets with commodity, currency and equities coverage. He is stationed in the Indian capital city of Delhi.

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