ING to note that the FOMC meeting this week will not be a non-event as many people think about the markets and the Forex.
«While the long-awaited announcement of a reduction of the balance sheet will be the main event, there will also be an interest on the new forecasts. These could be used to reinforce the message that, while there is little needs for rate increases, aggressive, the market remains too complacent on the prospects of higher rates.
With only a rate hike expected by the markets by the end of 2018, the market rate remains offset of projections of the Fed in June, that point to 100 points of rate hikes during the next 18 months.
We believe that the Fed will maintain its forecast of long-term rates unchanged, but we expect a rate hike in December followed by two more in the next year.
With several measures of inflation still below 2%, some members of the Fed may become less aggressive in their projections of rates. We wouldn’t be surprised to see the forecast for the rate to be closer to our anticipation of three rate hikes against four as previously indicated. «