Bill Diviney, senior economist at ABN AMRO, expects the FOMC to hike a further 25bp tomorrow, thereby taking the target range for the fed funds rate to 2.25-2.50%.
Key Quotes
“The focus for markets will be on to what extent the FOMC follows through on the recent dovish communication shift, and lowers its projections for future rate hikes.”
“We expect a fall in the ‘dots’ to signal two further rate hikes in 2019 (down from three), but for 2020 to be unchanged at one rate hike. We also expect some tweaks to the statement, particularly regarding the need for ‘further gradual increases’ in rates, which was hinted at in the November minutes.”
“We expect some qualifiers to be added to this statement to suggest we are approaching the end of the rate hike cycle (for instance, that further increases may yet be needed), but that the tightening bias will nonetheless remain. This would be consistent with the approach taken towards the end of the 2004-6 rate hike cycle.”
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