Fed: Expect a rate hike in December - ING

Recent sluggishness in US inflation and wage growth has made markets very sceptical about the chances of another rate hike this year, but analysts at ING are still optimistic that inflation will make a steady comeback as the weaker dollar, higher oil prices and economic strength put pressure on prices and pay.

Key Quotes

“That should secure another hike in December, but the lack of an imminent inflation turnaround might see a few Fed officials scale back their rate hike expectations at the next meeting on 20 September.”

“We're also expecting the Fed to kick start the mammoth task of shrinking its $4.5 trillion balance sheet. We know most of the details, but until now the market reaction has been fairly benign. But the sheer amount of Treasuries the market will need to absorb means a steeper yield curve cannot be ruled out.”