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“While no longer described as ‘accommodative’, monetary policy is far from restrictive. A strong domestic story means the Federal Reserve will continue to signal “gradual” rate hikes ahead, setting us up for a December move and then three more hikes in 2019,” argue ING analysts.

Key quotes

“We certainly agree with the December rate rise – new economic forecasts will be published and Fed Chair Jerome Powell gives another press conference to explain the rationale.”  

“We also continue to predict a rate hike in each of the first three quarters of 2019. However, we think that will bring an end to the Fed’s policy tightening. Trade uncertainty is creating a headwind for activity and as the support from the fiscal stimulus fades, and the lagged effects of higher US interest rates and a stronger dollar are felt increasingly, the US will lose some momentum.”

“Slower growth outside the US will also act as a brake and with Tuesday’s mid-term elections set to return a split Congress – the prospect of additional fiscal support will fade. This will take the pressure off the Fed to continue hikes into 2020.”