BNP Paribas Revises Its Fed Call, No Longer Expects Hikes In 2016 & 2017

In response to the tightening of financial conditions we have observed over the past month, BNP Paribas economists have made significant changes to their Fed forecasts and now no longer expect the Fed to hike rates in 2016 or 2017.

"Essentially, we expect the fragile risk environment to preclude tightening in H1 and slowing activity to argue against further rate hikes thereafter," BNPP argues.

"The shift in Fed expectations clearly has big implications for the dollar outlook and we are currently reviewing our USD forecasts accordingly.

For now, the funding currencies are likely to remain well supported and the USD on the defensive, though markets will remain wary of action and comments from other G10 officials, particularly in Japan where verbal warnings are possible as officials return from Thursday’s holiday," BNPP projects. 

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