FOMC preview: Fed to announce QT and still signal one more hike this year – Danske Bank

Analysts at Danske Bank expect no hike in the upcoming Fed meet but suggest that it will announce that it will begin shrinking its balance sheet in October.

Key Quotes

“This is widely expected and should not have a major impact on Treasury yields.”

“We expect the median ‘dots’ to still signal one more hike this year and three hikes next year. The longer-run median ‘dot’ may be revised down from 3% currently.”

“We do not expect major changes to the statement, as it already says the Fed monitors inflation ‘closely’. We are looking forward to hearing Janet Yellen’s view on the dilemma with low inflation and unemployment at the same time.”

“Any dips in EUR/USD will be shallow and short-lived but we emphasise that the speed with which EUR/ISD is set to move higher will be reduced going forward.”