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#1 20-12-2018 10:18:27

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Fed: risks point to 2 interest rate hikes in 2019 (ING)

Fed: risks point to 2 interest rate hikes in 2019 (ING)

ING points out that despite the Federal Reserve's fourth rate hike in 2018, considering rising barriers to growth and rising market tensions, it will be more cautious in 2019.

"The Fed raised its key rate by 25 basis points to 2.25-2.5% as expected, but the accompanying press release and its projected interest rate are relativistic.

After reporting in September that the most likely scenario was three rate hikes in 2019, five FOMC members lowered their forecasts. The median forecast is now two 25-basis point increases in 2019. They still expect a further rate hike in 2020, but have lowered the median long-term forecast of the federal funds rate from 3% to 2.8%.

Their forecasts for growth, unemployment and inflation have changed little. The statement incorporates forecast changes via the insertion of the word "some" in the valuation, indicating that "some new incremental interest rate increases" will be needed.

There are some other very subtle changes here and there, but all have clearly given the impression that the Fed is looking to slow the pace of rate hikes from the four observed in 2018.

In parallel, concerns about trade tensions, weak foreign demand and the resulting sharp stock market declines add to the feeling that times will be more difficult. This will mean that the Federal Reserve will adopt a more cautious, data-driven approach in its political decisions next year.

We, like the Federal Reserve, find that the risks are increasingly biased towards just two rate increases in 2019

"Anything worth having is worth going for - all the way." - J.R. Ewing



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