US: The first hike in nearly a decade – Scotiabank

By FXStreet FXStreet (Delhi) – Derek Holt, Research Analyst at Scotiabank, suggests that the Federal Reserve is expected by the vast majority of financial markets economists in Bloomberg’s consensus survey to hike its federal funds target range from 0-25bps now to 25-50bps.

Key Quotes

“Here is a summary of our expectations.

• A 25bps hike to the federal funds target range to 25-50bps as controlled by the FOMC.

• An upgraded labour market assessment from “the pace of job gains slowed” to something acknowledging two solid gains since the August-September soft patch.

• A continuation of data/state-dependent guidance on timing the next rate hike.

• Dissenter risk is likely to remove Richmond Fed President Jeffrey Lacker who will support a hike and insert Chicago Fed President Charles Evans who opposes hiking at this juncture.

• A change in the ‘dot plot’ that likely eliminates the negative rate forecast as Minneapolis Fed President Narayana Kocherlakota retires in January and by tradition skips the meeting before in favour of an alternate representative. On its own, this could put marginal upward pressure upon the median forecast for the federal funds rate by FOMC officials.

• It is uncertain whether and to what extent this will be offset by lowered guidance on FOMC rate …read more

Source:: FX Street