The last word of the year belongs to the Federal Reserve. A rate hike is already priced in. But what will they say?
Here is their view, courtesy of eFXdata:
SEB Research discusses its expectations for next week’s FOMC December policy meeting.
“The Fed will raise the target range for the federal funds rate to 2.25 to 2.50 percent at its next meeting on December 18-19. Neither the sell-off in equity markets nor President Trump’s criticism will make the bank reconsider its decision to hike rates this month, especially given the continued strong performance of the US economy and inflation close to the target. The Fed is adopting a more flexible monetary policy, making it harder to forecast how many times it will increase rates in 2019, and when it will do so. Currently, we predict two rate hikes, in March and June, but accept there are many factors that may cause the bank to act at a different time,” SEB projects.
“If the reference to a “further gradual increase” is dropped from the statement, as we predict, or the Fed changes its median forecast from three to two hikes in 2019, we should expect a slight decline in yields. However, financial markets are likely to be more sensitive to a hawkish message,” SEB adds.
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