Fed hikes to slow in 2019 - ING

According to James Knightley, Chief International Economist at ING, the latest CPI inflation release of the US will not alter the outlook for the December FOMC meeting where ING expects another 25bp rate rise.

Key Quotes

“After all, the economy continues to grow strongly for now and all the key inflation measures the Federal Reserve focus on are at or above the 2% target. We expect the one hike per quarter pace to continue next year through to 3Q19, but expect this to likely mark the peak.”

“The economy is facing a growing number of headwinds including the lagged effects of previous interest rate rises and dollar strength, the uncertainty of trade protectionism at a time when external demand is slowing and a sense that the support from the fiscal stimulus will gradually fade.”

“The main risk to the upside likely stems from the tight jobs market and whether wages can continue rising, but on balance we look for economic growth to slow through 2019 and this should see inflation pressures gradually recede late next year.”