FOMC Preview: Policy to remain on hold for now – Lloyds Bank

Rhys Herbert, Research Analyst at Lloyds Bank, suggests that the signs that stock markets are stabilising and US economic conditions improving have led markets to once again price in a significant risk that US interest rates will go up this year.

Key Quotes

“Despite this, the March FOMC meeting is unlikely to see a change in US monetary policy. However, the Fed will signal that interest rate hikes remain on the cards later this year.

The FOMC will use its press statement, Fed Chair Yellen’s post-meeting press conference and its forecast updates to indicate its intentions.

How many interest rate rises are forecast by FOMC participants for this year, the so-called ‘dot plot,’ will be watched particularly closely. We expect this to signal at least two interest rate rises of 0.25% for 2016.

The probability that markets place on a mid-year interest rate hike is likely to continue to rise over coming months.”