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FOMC: Maintaining right balance between dovish and hawkish – Danske Bank

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Dec 22, 2015.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

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    FXStreet (Delhi) – Research Team at Danske Bank, suggests that in connection with the first Fed funds rate increase since June 2006, we think the FOMC struck a good balance between being neither too dovish nor too hawkish.

    Key Quotes

    “The median ‘dots’ now signal four hikes in both 2016 and 2017, i.e. a total of eight hikes until year-end 2017 (down from nine). The unchanged ‘dot’ for 2016 hides that most individual dots have actually been lowered.”

    “We stick to our view that the Fed will hike three times in 2016 and four times in 2017 and find the current market pricing too soft, as only two full hikes are priced in for 2016 and an additional two are priced in for 2017.”

    “Although the coming month’s market rate outlook is likely to be characterised by range trading on the back of soft US data and the Fed speakers not wanting to rock the boat too much, we should expect US yields to continue trending higher, most significantly at the shorter end of the curve. Therefore, our forecasts for US rates remain above the forward market but we see most of the increase happening in the spring of 2016. We continue to expect a certain flattening of the curve 2Y10Y and 5Y10Y.”
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