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Fed likely to hike rate on Dec 14, to undertake two more rate hikes in 2017

The Federal Reserve will hold its last two-day monetary policy meeting on December 13-14, decision is expected to be released on Wednesday by 19:00 GMT.

It is widely expected that the central bank will increase the target range of the key interest rate by 25 basis points to 0.50-0.75 percent, with a unanimous decision, while making little change to the monetary statement, though the Committee is likely to acknowledge that market-based measures of inflation compensation have risen further.

With the economy seemingly close to ‘full employment’ there is a now a case for more hawkish guidance. A heavy sell-off in the U.S. Treasuries reflects concerns looser fiscal policy may cause the central bank to move more aggressively in the near future. Market is pricing two more hikes in 2017 from the Federal Reserve in the wake of Trump’s reinflation policies.

These hikes are expected to be a counter to curb rising inflation next year from government fiscal spending by increasing borrowing cost. Lastly, for now the Fed will probably not change its rhetoric, while it waits to see what fiscal policy measures are enacted.

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