Fed likely to hike in 2016, but mixed messages from Fed officials

New York Fed President Dudley, who is seen as an important swing voter, told the audience at a WSJ event yesterday that the Fed remains on track to raise interest rates later this year, thus echoing remarks made by Fed Chair Yellen last week. 

While noting that the economy was doing 'pretty well', Dudley also said that international events had created some uncertainty on the US outlook. Furthermore he said that the first hike could come in October but also cautioned that Fed decisions would be dependent on data, rather than the calendar. 

As expected, Chicago Fed President Evans took a more dovish view, calling for rates to stay near zero until mid- 2016. In contrast, San Francisco Fed President is in the opposite camp, stating yesterday that 'just a little bit' more data would convince him that a hike is needed and that he expected the normalisation process to begin this year.

"The Fed remains on track for lift-off in December, given the view that China is not in for a hard landing and that the upturn in the US is relatively robust. The Fed will continue the hiking cycle next year at a pace of three to four hikes in 2016", says Danske Bank.