U.S. Fed likely to hike in December, dots to be kept unchanged – Danske Bank

The U.S. Fed is set to meet next week for its policy rate decision. According to a Danske Bank research report, the Fed is likely to hike the Fed funds target range to 1.25-1.50 percent, consistent with market pricing and other analysts. Since the rake hike is fully priced in, the focus will be on the updated projections.

Currently, it appears that the Fed is on autopilot although it has become a bit more worried regarding the constant low inflation. Therefore, major changes to the ‘dots’ for next year are unlikely. The dots are expected to continue hinting at three hikes next year.

“We also believe the 2019 median dot to be unchanged at three additional hikes although this is more uncertain”, noted Danske Bank.

Forecasts for growth, inflation and unemployment are expected to be the same, except for unemployment, which is likely to be downwardly revised. The Fed’s NAIRU estimate is expected to see a further decline, which is currently 4.6 percent.

Yellen has pointed out that she believes monetary policy is not far from being neutral currently and that additional hikes depend on a rise in the natural rate driven by higher trend growth.

At 14:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was slightly bullish at 51.0044. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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