The U.S. Fed is likely to refrain from hiking its interest rates tomorrow, according to Nordea Bank. The communication of the U.S. central bank has been ambiguous ahead of the upcoming FOMC meeting. Fed Chair Janet Yellen and others on the FOMC - Esther George, Stanley Fischer, John Williams, Loretta Mester and Eric Rosengren – have hinted that they are closer to hiking the interest rate. But other officials such as Dennis Lockhart and Lael Brainard have argued that there is little urgency as there are very few indications of inflationary pressures even with a tight labor market.

With the differences in opinions amongst the 17 FOMC participants, it would be difficult for Yellen to come to a consensus view. However, given the recent weak growth data such as the retail sales and ISM surveys, and the fact that markets anticipate a only 20 percent possibility of a rate hike tomorrow, it suggests that the Fed doves would gain the upper hand, considering the Fed’s usual reluctance to surprise investors on the hawkish side, stated Nordea Bank.

Meanwhile, the U.S. Fed, however, is likely to leave the door open for hiking later this year. Therefore, the updated median forecast for the fed funds rate is expected to be lowered by 25 basis points to 0.625 percent, in line with one hike, said Nordea Bank.

“Reflecting the ongoing evolution of the views of Fed officials on the neutral rate, we also expect the median fed funds forecasts for 2017 and the longer-run to be lowered yet again”, added Nordea Bank.

The updated economic forecasts are expected to indicate moderate downward revision to 2016 GDP growth, whereas inflation and unemployment forecasts would possibly be little changed.

“We continue to expect the next Fed hike in December, as the recent data softness is believed to be only temporary”, noted Nordea Bank.