The FOMC has announced, as expected, a 75 basis point increase in the Fed funds target range to 3.75-4.00%. Danske Bank economists adjust their Fed forecast and expect a 50 basis point hike in February, plus another 75 basis point hike in December.
75 basis points in December and 50 basis points in February
“The Fed raised rates by 75 basis points, as widely expected. Powell delivered a hard line messageemphasizing the need to further tighten financial conditions. We have not seen the Fed make significant progress towards its targets in the last month“.
“We adjusted our Fed forecast and now we see the terminal rate at 5.00-5.25% after a 75 basis point hike in December and a 50 basis point hike in February.”
“Markets took the FOMC statement with a grain of salt, but the move fizzled out during the press conference and EUR/USD fell below pre-meeting levels, while the 2Y Treasury yield rose around 6 basis points. We maintain our forecast for the EUR/USD at 0.93 in 12 months“.
Source: Fx Street