No more rate hikes this year, 3 in 2018 – BNPP

The Fed is set to make its decision today and the focus is on the word “transitory”[1]. However, the bigger decisions are still down the road. The team at BNP Paribas changed their forecasts for the next rate hikes.

Here is their view, courtesy of eFXnews:

BNP Paribas economists have made significant changes to their forecast for the Federal Reserve’s policy as they now expect the US central bank to leave the Fed funds target range unchanged for the balance of the year and to hike rates just three times next year.

“Soft CPI readings are the main reason for the expected pause, with BNP Paribas projections for the core PCE deflator this year too soft to support rate hikes ahead of a likely change to the Fed’s leadership next year.

We still expect the Fed to begin its balance sheet reduction this year with an announcement in September, and three rate hikes next year are still more than markets are pricing in,” BNPP adds.

In light of this new outlook for Fed policy, BNPP FX Strategy Research is currently putting its G10 FX forecasts under review. 

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