|

Fed will probably remove more of its forward guidance to increase its flexibility - Danske Bank

Mikael Olai Milhøj, Senior Analyst at Danske Bank, sees the Federal Reserve raising rates next week and considers it could implement changes to the forward guidance. 

Key Quotes: 

“We expect the Fed to raise rates again when the committee meets next week. This would bring the target range to 2.25-2.50%, i.e. the lower end of the broad range of the estimates of the neutral rate according to the September dots (2.5-3.0%, with most saying 3.0%).”

“While we think the Fed’s base case remains that the gradual hiking cycle will continue a bit further, the Fed will probably remove more of its forward guidance to increase its flexibility (as it did in June), as risks to the rate outlook become more two-sided with the Fed funds rate in the broad neutral range.”

“Do not be surprised if the Fed removes that it ‘expects further gradual increases in the target range’ from the statement. It makes sense to get rid of the one-sided rate outlook, as monetary policy becomes more neutral.”

“We think the Fed will continue to signal three hikes next year but see risks that the 2020 and 2021 dots are lowered. The longer-run dot is likely to be unchanged at 3.00%.”

“When 3% is reached, further hikes will be more ‘stop and go’ depending on how the economy is doing. Our Fed call means markets are pricing the Fed too dovishly at the moment.”
 

Author

Matías Salord

Matías started in financial markets in 2008, after graduating in Economics. He was trained in chart analysis and then became an educator. He also studied Journalism. He started writing analyses for specialized websites before joining FXStreet.

More from Matías Salord
Share:

Editor's Picks

EUR/USD slumps below 1.1800 on hawkish Fed Minutes, eyes on ECB succession

The EUR/USD pair tumbles to a near two-week low around 1.1785 during the early Asian session on Thursday. The US Dollar strengthens against the Euro on hawkish FOMC minutes that revived speculation about potential interest rate hikes if inflation remains elevated. 

GBP/USD extends decline as weak jobs data bolsters BoE rate cut bets

The Pound Sterling continued to backslide under sustained pressure on Wednesday, following through after the UK employment report on Tuesday showed a labour market deteriorating faster than expected. 

Gold yearns for acceptance above the $5,000 mark

Gold preserves 2% advance seen on Wednesday as buyers gather pace early Thursday. The US Dollar holds January Fed Minutes-led gains ahead of more US macro data. Gold needs a sustained break above the key $5,000 barrier; daily RSI stays bullish.

Bitcoin approaches a critical zone: Bear pennant projects $56,000

Based on the most recent analyses from February 2026, the short answer is that it is highly unlikely that Bitcoin will reach $100,000 this month.

Mixed UK inflation data no gamechanger for the Bank of England

Food inflation plunged in January, but service sector price pressure is proving stickier. We continue to expect Bank of England rate cuts in March and June. The latest UK inflation read is a mixed bag for the Bank of England, but we doubt it drastically changes the odds of a March rate cut.

Sui extends sideways action ahead of Grayscale’s GSUI ETF launch

Sui is extending its downtrend for the second consecutive day, trading at 0.95 at the time of writing on Wednesday. The Layer-1 token is down over 16% in February and approximately 34% from the start of the year, aligning with the overall bearish sentiment across the crypto market.