Danske Bank analysts are expecting that the US Fed will likely keep the target range unchanged at 2.25-2.50% and make no major changes to the statement in its forthcoming meeting this Wednesday.
We expect Fed to lower its 'dot' signal further to just one rate hike in 2019 (down from two) .
We expect them to be revised lower also for 2020 and 2021 and we will not be surprised if the Fed signals "one and done".
We expect the longer-run dot is to be unchanged at 2.75%.
Our current base case is two Fed hikes (in June and December) based on our overall positive economic outlook.
However, if the Fed confirms it has changed its reaction function by looking more at inflation expectations and less on the unemployment rate, a June hike seems less likely
We believe the Fed will announce it will end shrinking its balance sheet in Q4.
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