The US Federal Reserve will on Thursday raise interest rates for the first time since 2006 with more hikes to come next year, banks signal in a CNBC survey.
In a vote that was unanimous, all of the 19 banks polled by CNBC predicted that there will likely be a rate hike this year with all but one indicating that there will be one or more hikes ahead in 2016.
Just one-Saxo Bank-thinks there will just be one rate hike in store.
Sealing the deal was US’ employment report for November that showed non-farm payrolls coming in well in excess of the less than 100,000 jobs Fed chair Janet Yellen said is enough to cover new entrants into the labor force, thus keeping the unemployment rate steady, added ANZ.
While financial markets have wobbled ahead of the Fed decision—oil prices have tanked and high-yield debt has come under pressure—economists at Nomura believe the selloff was unlikely to delay a rate hike.
After Wednesday’s meeting, the attention will shift quickly to when the next hike is coming, said ANZ, noting that Fed officials have indicated that tightening will be gradual.
Although the markets may see downside after the first expected rate hike this week, the Fed is unlikely to be sympathetic to investors.
“We doubt the Fed will be able to satisfy expectations for a ‘dovish hike'”, said Bank of America Merrill Lynch’s global and US economist Michael Hanson in a note, adding that Yellen’s remarks are likely to be dovish – “although perhaps not as dovish as the market hopes”.
However, the market has already priced in just over two rate hikes next year and a much lower terminal rate.
“The FOMC is likely to stress a gradual pace of rate hikes and there may be dovish dissent…markets may selloff modestly on the announcement but it should not trigger a sharp tightening of financial conditions,” he added.