Fed rate hike on the way, too early for the ECB to tighten – Danske Bank

Analysts at Danske Bank expect the US central bank, the Federal Reserve, to hike rates at its meeting in July.

Key Quotes

“The Fed will be meeting before that, in June, and a rate hike at this earlier juncture cannot be completely ruled out. The market is pricing in a 60-70% probability of a 25bp rate hike in June and a 100% probability of a hike in July. The Fed is also likely to present further details on a planned reduction of its USD4.5 trillion balance sheet (quantitative tightening) at its June meeting.”

“Also, speculation is growing on whether the ECB might turn more hawkish at its June meeting. However, such speculation is very premature, in our view, as the prospect of sustained, underlying inflationary pressures in the Eurozone is still a long way off. Indeed, we see a greater likelihood of the ECB extending QE into 2018.”