Fed Policy Outlook: expectations for a Dec Fed hike have risen
Fed Policy Outlook: expectations for a Dec Fed hike have risen in recent sessions and are around 47%. That's up from around 25% back in mid-August when fearful geopolitical events including Barcelona, and North Korea, along with Washington drama, and some dovish Fedspeak amid worries over soft inflation boosted Fed funds futures. However, in recent sessions, the unwind of the safe haven flows, along with signs of rising inflation in the U.K. and Europe, some hawkish views from BoE and ECB policymakers, a bounce in oil prices, expectations of rising price pressures on hurricane recovery efforts, and an ever-tightening labor market, have rekindled expectations for a Fed hike. Analysts continue to forecast one more 25 bp increase in July, which is also the Action Economic Survey median estimate. Note that there is a long way to go before then, with three more CPI reports before the December 13 decision. As for next week, analysts expect the FOMC to announce the start of the balance sheet unwind.