Fed will hike in September – Danske Bank

Research Team at Danske Bank, stick to their view that the Fed will hike in September but that risks are currently skewed towards a later hike as it would probably require a rebound in employment.

Key Quotes

“If it is the case that we see a rebound in the June jobs report and other data also meets expectations, the Fed could prepare markets for a September hike at the July meeting. If September is off the table, the next possibility seems to be December, as the November meeting is less than a week before the US presidential election.

In our view, most voting FOMC members have a dovish-to-neutral stance on monetary policy and they would rather postpone the second hike than tighten too much, too quickly. We still expect one hike this year and three next year.

Our assumption of a September hike is based on our main assumption that the UK remains in the EU. If not, the second hike could be postponed even further. The markets are pricing in a 20% probability of a hike in July, 35% in September and around two-thirds by year-end.”