The US Fed is likely to keep its target range at 0.25-0.50% in its upcoming meeting, consistent with consensus forecast, according to Danske Bank. The central bank is likely to maintain its view included in the March statement that global financial and economic developments continue to pose risks, noted Danske Bank.
The dovish members are expected to keep their cautious stance despite easing of financial stress and stabilization in China. Fed Chair Yellen had highlighted during her last speech that the economy faces risks on the downside.
Meanwhile, the Fed’s statement is likely to note that the US economic growth decelerated in the first quarter but is expected to be transitory. The Fed is likely to expect a recovery in the second quarter, added Danske Bank. Furthermore, the US Fed is unlikely to alter any of its projections for inflation and labor market. Meanwhile, the Fed’s decision to hike or not in June is a major question, according to Danske Bank.
“Given that the pickup in core inflation has not ‘proved durable’ and growth slowed in Q1, it is too early for the Fed to say that ‘risks are nearly balanced’ thereby implicitly closing the door for a June hike, in our view”, said Danske Bank.
The US Fed is expected to keep the rates unchanged until September and raise rates just once this year, added Danske Bank. The US Fed is not expected to risk tightening policy too much very soon and is expected to postpone the rise further.
