Fed will raise interest rates only slightly in 2016 and 2017 – Commerzbank

By FXStreet Dr Jörg Krämer, Chief Economist at Commerzbank, suggests that after on 16 December 2015, the Federal Reserve raised its key rates by 25 basis points, its next step is a long time coming.

Key Quotes

“Even the Fed finds it difficult to hike interest rates in an environment where other central banks are becoming more expansionary.

In the statement released after the April meeting the Fed accorded a lower weight than before to the risks arising from the global economy and the financial markets. But unlike in October 2015, it gave no broad hint that a rate hike was imminent.

We still think the tightening process has only been interrupted but not ended. After all, the US labour market is still robust and inflation shows signs of accelerating.

But since the Fed obviously sees no reason to hurry and wants to be sure, for example, that economic growth is picking up before raising rates again, we now expect only one more rate hike each in 2016 and 2017.

The timing of the moves will depend on incoming data, especially on inflation. We forecast the next move for December 2016.”
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Source:: FX Street