Fed to revise higher its dot plot to four 2018 rate hikes – Danske Bank

The strong US ISM manufacturing report yesterday added fuel to market speculations of Fed potentially revising higher its dot plot to four 2018 rate hikes at the forthcoming meeting in March, according to analysts at Danske Bank.

Key Quotes

“The accompanied ISM sector statements indicated rising import price pressures, rising capital equipment expenditures following the tax reform as well as labour shortages in some industries. Meanwhile shortly after the ISM release, Fed chair Powell toned down his hawkish remarks from Tuesday, partly reversing the more aggressive Fed pricing and halting the slide in EUR/USD. Overall our view remains, that the Fed is unlikely to hike rates aggressively this year. We might get a fourth rate hike this year but a fifth seems unlikely and at this stage our base case remains three.”