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Further US rate hikes to come

Nitesh Shah, director at ETF Securities, comments on the US Federal Reserve’s decision to raise interest rates for the sixth time since the financial crisis…

In the first Federal Open Market Committee (FOMC) meeting with Jerome Powell as the Chairman of the Federal Reserve, the US Central Bank has raised interest rates. A substantial upgrade in forecasts paves the way for potentially three more hikes (for a total of four this year). Coming into the meeting, the market had only fully priced in three in total for the year. 

Median GDP forecasts for this year were increased to 2.7 per cent from 2.5 per cent in December and 2.4 per cent in 2019 from 2.1 per cent in December. Inflation forecasts however remained the same. Looking at the “dot-plots” – the FOMC participants own estimate of where rates will end the year – they appear to be split between three or four hikes for this year, but given how few members expect anything less than three, it will only take a continuation of good economic data to nudge the committee to four hikes for the year. 

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