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FOMC: We still expect three rate hikes in 2016 - Danske

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Jan 28, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

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    FXStreet (Córdoba) - According to analysts from Danske Bank, the Federal Reserve will increase the interest rate three times during 2016, despite yesterday’s dovish statement; but warned about downside risk to the projection.

    Key Quotes:

    “As expected, the Fed funds target rate was unchanged at 0.25%-0.50%. The vote was unanimous. The statement was dovish and more or less in line with our expectations.”

    “Overall, the statement supports our view that the Fed will also skip March, although Fed is keeping the doors open. The main change in the statement was that Fed is no longer ‘reasonably confident’ that inflation will reach 2% in the medium term.”

    “As expected, the Fed reinstated that it is ‘monitoring global economic and financial developments’. It is also worried about the fall in market inflation expectations.”

    “We stick to our view that the Fed will increase the Fed funds target rate three times this year (April, September and December). However, we still believe there are downside risks to this call, as the Fed will not risk tightening too much, too quickly, in our view.”

    “Markets have still priced in one full hike this year and one next year.”

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