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Key market focus in 2016: How the FED will raise rates - Lloyds Bank

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Dec 18, 2015.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

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    FXStreet (Córdoba) - According to analysts from Lloyds Bank, a key market point during 2016 will be how the Federal Reserve will continue to raise rates, considering the current gap between FOMC projections and current market pricing.

    Key Quotes:

    “As expected the Fed hiked interest rates by 0.25% at its December meeting. Initial market reaction has been mostly positive. The US dollar has modestly risen; bond markets, including US Treasuries are little changed, while equity markets have responded calmly.”

    “What happens next, in part depends on the Fed’s next steps. Its guidance is that any further interest rate rises will be ‘gradual’. This seems consistent with current market pricing, which does not imply another rate increase until around the middle of next year and only two quarter-point rises in 2016 in total.”

    “However, the FOMC’s interest rate forecasts continue to point to a faster pace of tightening. How this ‘gap’ between market and FOMC expectations closes will determine how financial markets behave over the coming year.”
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