The Federal Reserve hiked and it was not dovish. The dot plot even implies 4 hikes next year. Is that really so?
The team at Credit Agricole sees 3 hikes:
Here is their view, courtesy of eFXnews:
The FOMC raised the Fed funds target range by 25bps to 0.25% to 0.50% effective December 17th in line with expectations. The IOER rate was raised to 0.50% and the ON RRP rate set at 0.25%. The FRB also announced a 25 bps increase in the primary credit (discount) rate to 1.0%. The committee’s current reinvestment policy on its holdings of Agency MBS and Treasury securities was maintained and it is unlikely to change until rate normalization is “well under way”
The year-end 2016 median fed funds rate projection (dot plot) was unchanged at 1.375%, implying 100 bps of rate increases projected in 2016 by Fed officials.
Based on our economic outlook, we look for a steady fed funds rate in 2016 Q1 as the FOMC assesses progress on the inflation front and the economic and financial market response to rising rates. We see 3 additional 25 bps Fed funds rate increases during the balance of 2016, with the yearend target range at 1.0% to 1.25%.
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