The US Fed, during its FOMC meeting that ends tomorrow, is not expected to hike rates. The FOMC is likely to avoid making a clear risk assessment again, signifying extended policy pause, according to Nordea Bank. However, the risk is skewed towards a slight hawkish statement for a hike in June.
With the Q1 GDP growth expected to be weak, a still uncertain effect of the tightening of financial conditions in the beginning of 2016 and the US Fed’s renewed concentration on asymmetric policy risks, the US Fed is expected to give a cautious signal, added Nordea Bank.
Moreover, the Fed is likely to provide a soft policy signal due to the uncertainty regarding the UK referendum on Brexit. The median FOMC forecast implies two hikes in 2016 as compared with the four hikes expected in December 2014. With this the FOMC has sufficient time to get markets ready for hike in rate.
“For now, we expect the next Fed rate hike in December”, noted Nordea Bank.
