Federal Reserve likely to set target rate at 2.00-2.25 pct range; new policy signals unlikely: Danske Bank

The Federal Reserve is expected to hike the target range to 2.00-2.25 percent, but not send any new policy signals, according to the latest research report from Danske Bank. With respect to Fed projections, it will most likely still signal another hike in December (and probably that more FOMC members support this) and three hikes next year (it was divided between two or three additional hikes next year and it would take four members to move it higher).

The Fed will also still signal that it is going to raise the Fed funds rate above the longer-run rate . The longer-run rate may be revised higher to 3.00 percent. It seems on track to deliver two more hikes this year (next week and in December).

Growth is strong, optimism is high, the unemployment rate is low, wage growth is increasing (although at a gradual pace) and core inflation is running near the 2 percent target.

"We believe it will be more 'stop and go' for the Fed when the funds rate has reached neutral (2.75-3.00 percent range), which we believe is likely to happen in March 2019," the report commented.