Fed Funds rate hike likely in January next year

The slowdown in job growth in the United State and continued lack of wage inflation is likely to keep the Fed off the trigger a while longer. 

"We now expect the first Fed Funds rate hike in January next year with a risk that the Fed will wait until the March FOMC meeting. We expect three hikes next year (75bp) and 100bp in rate hikes in 2017", estimates Danske Bank. 

The hiking pace implied by money market forward rates has become even more subdued with only two hikes priced for next year and less in 2017. 

"Our projected 3M USD Libor fixings is in line with forwards for the coming three months but, given our expectations for the Fed funds rate path, our forecast for the fixing is well above forwards next year", added Danske Bank.