FOMC meetings concludes on Wednesday, with the rate announcement at 19:00 CET (note that this is an hour earlier than usual as Europe has shifted back to winter time)
We expect Fed to maintain the target range at 0.25%-0.50%, in line with consensus, due to the presidential election next week.
Small meeting without updated 'dots' and a press conference, so the most interesting part is the statement
We do not expect any major changes to the FOMC statement, as it was already quite hawkish last time, as it state that the case for a rate hike had 'strengthened'.
Our non-consensus call that Fed will not hike this year has come under pressure given the better US economic data. However, we still think it is too early to say a December hike is a done deal although admittedly the probability has increased significantly. We still have some important data releases left.
Markets have priced in a 75% probability of a December hike, probably as high as it can get by now.
If Fed is about to hike rates in December, the next question is how many hikes to expect next year. Important to remember Fed shifts in a more dovish direction due to shifts in voting rights. It may be we should get used to a 'once a year' hiking pace.
To read the entire report Please click on the pdf File Below