Fed: 50 bps also in February, EUR/USD still seen at 0.93 in 12 months – Danske Bank

The FOMC delivered, as expected, a 75 bps increase in the Fed Funds target range to 3.75-4.00%. Economists at Danske Bank adjust their Fed call and expect a 50 bps hike in February in addition to one more 75 bps hike in December.

75 bps in Dec and 50 bps in Feb

“Fed hiked rates by 75bp as broadly expected. Powell delivered a hawkish message, emphasizing the need to tighten financial conditions further. We have not seen Fed make significant progress towards its goals over the past month.” 

“We adjust our Fed call and now see the terminal rate at 5.00-5.25% after a 75 bps hike in December and a 50 bps hike in February.”

“Markets took the FOMC statement dovishly, but the move faded during the press conference and EUR/USD declined below pre-meeting levels while 2y UST yield rose around 6 bps. We maintain our forecast for EUR/USD at 0.93 in 12M.”