The U.S. Fed kept its monetary policy on hold following the FOMC meeting earlier in May, as was widely anticipated. The largely unchanged statement by the central bank suggests that there still is a possibility of a rate hike during its next meeting on 14 June, noted Lloyds Bank in a research report.
The Federal Reserve had stated that the deceleration of the economic growth in the fourth quarter is “likely to be transitory”. A range of Fed speakers since that meeting have affirmed the central bank’s intention to hike rates twice more in 2017. Markets are pricing a high possibility of more than 90 percent of a rate hike in June, according to Fed funds futures on Bloomberg. However, they are less convinced of an additional rise in the second half of the year.
“We expect the Fed to raise policy rates two more times this year, in June and September, to 1.50 percent and three times in 2018 to 2.25 percent”, added Lloyds Bank.
