The economists of Danske Bank they are once again changing their forecasts on the Federal Reserve. They expect 2% rate hikes this year starting in March with a 0.50% increase.
US recession fears are rising as the yield curve flattens
“We changed our vision of the Fed’s action and now we expect it to raise rates by 2% this year (versus 1.25% previously). We expect the Federal Reserve to raise interest rates in 50 basis points in March and 25 basis points at each of the next six meetings“.
“We expect the Fed to raise interest rates three times in 2023 and to remain unchanged when the target range reaches 2.75-3.00%.”
“We will not be surprised if the Fed announces that it ends QE immediately, although it did not happen over the weekend. We now expect the entity to start QT in May with a limit between 100,000 and 125,000 million dollars (from 75,000-100,000 million provided above)”.
“We still see skewed risks towards the Fed pulling the emergency brake by going faster and stronger. This also means a increased risk of a recession in the future and we will not be surprised if the yield curve inverts reflecting heightened recession fears.”
“The Fed needs to curb demand and reduce inflation fears by tightening monetary and financial conditions and that also increases the risk of a hard landing rather than a soft one.”
Source: Fx Street
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