FOMC will raise its short-term interest rate targets three times this year - Nomura

Research Team at Nomura suggests that in the wake of recent comments by FOMC participants, they are changing our call on Federal Reserve monetary policy decisions and they now think that the most likely outcome is that the FOMC will raise its short-term interest rate targets three times this year, in March, September and December.

Key Quotes

“Previously, we had expected just two hikes in June and December.”

“The call for an interest rate increase at the next FOMC meeting comes with a word of caution. We are responding to recent statements from committee members, including President Dudley’s comments yesterday. However, it is not entirely clear to us what FOMC participants are reacting to and exactly how strong their intentions are. What is clear is that the FOMC seems intent on seriously considering raising rates in March. Some important data will be released next week, especially the employment report on 10 March. (Recall that last year a weak employment report for May, which was released in early June, contributed to the decision to leave rates unchanged at the June meeting.)”

“A March hike is not set in stone – we judge the probability of a move at two-thirds. Of course, Chair Yellen’s speech on Friday will be important, but we expect her to express the consensus FOMC view, which, given recent statements by committee members, suggests that that is moving towards a rate hike in two weeks.”