Fed likely to hike 50bp three meetings in a row, and then three 25bp – Danske Bank

Analysts at Danske Bank continue to expect the Federal Reserve will hike interest rates by 50bp three meetings in a row (May -next week-, June and July) and 25bp on each of the last three meetings (September, November and December). They are still of the view that risks are skewed toward faster and more rate hikes. 

Key Quotes: 

“We expect the Federal Reserve to hike the target range by 50bp, a view shared by consensus and market pricing. We expect the Fed to signal that more 50bp rate hikes are likely in coming months in order to get quicker back to neutral.”

“We expect the Fed to announce the balance sheet runoff to start in mid-May. We expect the cap to be set at USD95bn as outlined in the minutes.”

“Our current Fed call is that the Fed will hike by 50bp in May, June and July and 25bp in September, November and December (a total of 225bp). We still see risks skewed towards faster rate hikes, as monetary policy remains too accommodative.”

“We do not expect a substantial USD strengthening on the announcement of a 50bp hike - but rather view the USD strength as continuous; as it has been over the last one and a half year.”