FOMC: bubbles going to go pop? – Raboabank

By FXStreet FXStreet (Guatemala) – Analysts at Rabobank explained that they think that the downside risks to the Fed’s rate projections are larger than the upside risks.

Key Quotes:

“Therefore, we do not expect the Fed to make the four rate hikes in 2016 implied by the dot plot. Instead, we think that they will hike only twice next year. This also implies that we expect further downward shifts in the median values of the dot plot, probably as soon as March.

There are several downside risks to the pace of the economic recovery. First of all, the strength of the US dollar continues to be a major headwind for exporting firms. Secondly, the global economy continues to be weak. What’s more, the downside risks to the Chinese economy going forward may be underestimated by the FOMC.

The inflation outlook also harbors downside risks to the Fed’s rate path. In the first place, if the recent decline in the oil price is not reversed, year-on-year oil price changes in the coming year will continue to drag down the headline inflation rate for the US. Secondly, any further dollar appreciation would slow down the rebound in core inflation.

Thirdly, muted wage growth may also …read more

Source:: FX Street