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Analysts at ING suggest that as the US Fed members gathers again this week to set monetary policy, a 25 basis point interest rate rise is the near-universal expectation.

Key Quotes

“Growth is undoubtedly very strong, with high-frequency indicators suggesting activity likely accelerated in 3Q18 after the economy expanded at an already stellar 4.2% annualised rate in 2Q18. At the same time, all of the major inflation measures are at or above the Federal Reserve’s 2% target, wages are picking up, the unemployment rate is close to an 18-year low and asset prices continue to rise. All this points to further tightening of policy.”

“We are also seeing a broadening out of the reasoning for higher interest rates. For example, Boston Fed President Eric Rosengren has repeatedly warned that monetary policy should be tightened from a financial stability perspective. He and others worry that unduly low borrowing costs could be the trigger for excessive risk-taking, which will store up trouble for the US economy in the future.”

“For that reason, we expect a rate hike this week and another in December. But markets will be watching closely for hints about the Fed’s plans for 2019.”