Here are the key quotes that we have collect from major banks across the globe about their expectations from Fed’s policy decision tomorrow:
ABN AMRO: Dots to shift, but not aggressively
“Finally, we expect the quarterly ‘dot plot’ rate projections to signal a shift to easing.”
“As of the March projections, they continue to show one expected hike in 2020. At the very least, we expect this hike to be removed; more likely than not, one rate cut will be projected for this year or next”
ING: Fed to signal precautionary interest rate cuts are coming
“With trade tensions likely to escalate, this Wednesday’s Fed meeting looks set to confirm market expectations – precautionary interest rate cuts are coming,” argue ING analysts.
“After hiking interest rates four times in 2018 the Federal Reserve has taken a more cautious approach to monetary policy in 2019.”
“On Wednesday, we expect the Fed to signal precautionary rate cuts. Markets favor a 25bp rate cut in July with three additional rate cuts over the next twelve months.”
“We are a little more cautious seeing two 25bp moves in the second half of 2019, given the underlying strength of the US economy and our belief that President Trump will want a trade deal signed well ahead of the presidential elections next year.”
DANSKE BANK: “It is crunch time for the ECB and the Fed and we stick to our call for EUR/USD to rise to 1.15 in 3M as the Fed is set to ‘out-ease’ the ECB.”
MORGAN STANLEY: “Dovish FOMC may focus on falling inflation expectations – In light of rapidly falling inflation expectations, the Fed is likely to keep the door to a summer rate cut open. US retail sales strength encourages investors to talk about a mid-cycle rate cut, which would be risk-positive.”
Deutsche Bank: “Friday’s strong retail sales data (more later) adds to the complexity. It’s hard not to feel that they are being driven into a corner at the moment as markets are now pricing in virtually a full rate cut at the July meeting and a further 2 cuts over the next 12 months.”
“Expectations are much lower for a cut this week, with around an 18% chance. Our US economists recently changed their Fed call and expect 3 cuts of 25bps each at the July, September and December meetings. They also lowered their 2019 growth forecast by 40bps to 1.9%.”
So all eyes on Wednesday!