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The time for the first US rate hike is approaching. The market turbulence linked to China points to lift-off later this year than September although September is still a possibility. In the new forecasts, the US Federal Reserve's hiking pace has lower to four hikes in 2016 and in 2017, an unusually slow pace.
Nordea Bank foresees the change in monetery policy of major central banks like BoE, ECB, Norges Bank, and Danish central bank as a result of Fed's rate hike.
- The Bank of England is expected to follow the Federal Reserve with a lift-off in the first quarter of 2016, while no rate hikes from the European Central Bank is foreseen before 2018. However, the ECB's QE programme will be tapered in 2017.
- The Danish central bank has started to normalise monetary policy after the strong inflow into the DKK earlier this year, a process expected to continue the next few months.
- Norges Bank and the Riksbank still seem to be in easing mode, the former because of low economic growth, the latter because of low inflation. Norges Bank's next rate cut will probably be delayed to late this year because of the weak NOK.
Long-term government yields declined in the US and Europe in connection with the market turbulence in August, but have come up again. US yields are expected to increase gradually with the Fed hiking rates, while German yields may be more flat the next few quarters.
