Research
Tip: To personalise the research list, click the gear symbol above.


Choose type:


Fast Comment USFed hikes and raises rate outlook for 2019, 2020

  1. Fed hikes and raises rate outlook for 2019, 2020
  2. Press statement little changed; significantly lower unemployment forecasts
  3. USD slightly lower, curve steepens
Fed hikes and raises rate outlook for 2019, 2020
The Fed hiked rates by 25 basis points, in line with expectations. The median forecast for the policy rates was unchanged for 2018, signalling two more rate hikes. Worth noting is that the Fed was only one dot (member) away from forecasting three more rate hikes (four in total). In addition, the forecast was raised for both 2019 and 2020, indicating a peak in the Fed funds target at 3.37 percent compared with 3.06 percent in the December forecast.
Press statement little changed; significantly lower unemployment forecasts
While the press statement was little changed, it reflected an upward revision to the growth forecast. The revision to unemployment was even more significant with the trough now seen at 3.6 percent in 2019 and 2020 (previously 3.9, 4.0). Inflation is forecast at 2.1 percent in 2020, so a mild overshoot is expected. There was no mention of the recent rise in short-term rates in the press statement, but it will surely come up at the press conference.
USD slightly lower, curve steepens
The USD weakened slightly on the outcome and 2y yields are a touch lower while 10y yields are slightly higher. Currently, the market is pricing in just over two more rate hikes in 2018. Our main scenario is two more hikes, but we see a fair chance of three.

Disclaimer

Claes Måhlén

Chief Strategist

Fixed Income

clma02@handelsbanken.se

Latest analyses

2018-08-31

Swedish Rate Wrap

2018-08-30

Ränterullen

2018-08-17

Swedish Rate Wrap