Tag Archives: Fed rate forecast

Next year is likely to mark the end of the tightening cycle as the Fed fund rates moves closer to the Fed’s estimate of the nominal neutral rate.The Federal Reserve estimated the theoretical, inflation-adjusted (‘real’) neutral rate at 0.8% in Q3 18, slightly down from 0.9% in Q2, but in line with the average since 2016.Adding core PCE inflation of 1.8% year-on-year in October (down from 1.9% in September), this means a ‘spot’ nominal neutral rate of 2.6%.The Fed’s strategy has been to...

Fed rate hikes this year are on auto pilot. But things could change in 2019.As widely expected, on 13 June the Federal Reserve raised its fed funds target rate range by 25bps (and the interest rate on excess reserves by 20bps), bringing the range to 1.75-2.0%. The ‘dot plot’ median (Fed members’ forecasts of future rate hikes) rose from three rate hikes in 2018 to four. Fed members still expected three additional hikes next year.A fed funds rate of up to 2% is new territory for the Fed,...

Policy makers’ forecast for rate hikes this year likely to be raised, but central bank will be much more cautious on view further out.The Federal Reserve’s 12-13 June meeting takes place amid a strong economic backdrop at home, and the Fed is unlikely to hesitate about hiking rates by another quarter-point to a range of 1.75-2.00% this week. The US labour market is particularly solid: the unemployment rate dropped to 3.8% in May, the lowest rate since April 2000. The three-month average gain...

Hawkish comments from several Fed officials mean we now expect three quarter-point rate hikes from the Fed this year, with the first coming this month.As we don’t expect any big negative surprise in the February employment report (to be released on Friday), the probability of a hike next week has risen sharply. We are therefore changing our forecasts for Fed rates this year. Our main scenario is now that the Fed will first hike in March, instead of June. Moreover, to be more consistent with...

Brexit puts upward pressure on US financial conditions, but growth forecast remains unchanged Read full report hereSo far, the UK vote to leave the UE has only led to a modest tightening in US monetary and financial conditions. Nevertheless, Brexit will probably mean lasting upward pressure on the US dollar and on US financial conditions.The UK absorbs less than 4% of US exports and the total of EU countries around 18%. This corresponds to 0.5%, respectively 2.3% of US GDP. Even a recession...