According to analysts from Danske Bank the Federal Reserve will leave interest rates unchanged at the FOMC meeting and will keep the door open for a hike in June.
Key Quotes:
“We expect the Fed to keep the Fed funds target rate unchanged at 0.25-0.50% at this week’s FOMC meeting. As this is widely expected among analysts and market participants, focus should quickly shift towards the updated projections and, in particular, on the FOMC members’ projections for the Fed funds target rate (the so-called ‘dots’).”
“If the Fed stays on hold as expected, this would in itself lead to a lower median ‘dot’ this year of 25bp. In our view, this would signal that most FOMC members think that the rough start of the year has merely been a bump in the road.”
“However, just two of the seven members projecting four hikes in December have to lower their individual ‘dots’ more than 25bp before the median ‘dot’ for 2016 would signal two hikes (from four in the December projections). This would signal that most FOMC members have become less optimistic on the outlook, which warrants that the Fed should carry on more cautiously.”
“Overall, however, given that the labour market continues to perform well, PCE core inflation has been higher than expected in recent months and as we have seen a rebound in risk sentiment, we think that the Fed will keep the door open for a hike in June.”
(Market News Provided by FXstreet)