Fed’s hike should come in Q3 2016 – ING

Rob Carnell, Analyst at ING, assessed the likeliness of a Fed’s rate hike in Q3.

Key Quotes

“With only a six week period between the March meeting and the April one, we see some scope for wages to pick up again, but probably not sufficiently to push into a new range”. 

“Likewise, headline inflation is now struggling to stay elevated as the year on year comparisons have to deal with the short lived February – July 2015 oil-related pick-up in gasoline prices”.

“As a result, an April hike, whilst “live” is probably not a strong contender in our view, though the April meeting could be used to flag the possibility of a June hike, without pre committing. For now though, we are happy to leave just one hike in for 2016 in the third quarter”.

“Consequently, we would not be at all surprised if, over the next few weeks, the post-dot diagram euphoria wore off, equities struggle to find new reasons to go up, and bond yields settle back to a higher level again in anticipation of the Fed’s ultimate return to monetary tightening”.