Global Investors Back Fed’s Plan to Hike Rates 3 Times in 2018; Markets Disagree

Investing.com - With 2017 coming to an end, markets are turning their focus to the coming year and appear to agree with the Federal Reserve’s own outlook that the U.S. central bank will hike interest rates three times in 2018. When the Fed updated economic projections in its December meeting, the dot plot showed that the median forecast for interest rates at the end of 2018 was 2.125%, equivalent to approximately three 25 basis point hikes from the current range of 1.25% to 1.50%.A recent Reuters poll of 51 wealth managers in the U.S., Europe, the UK and Japan showed that two-thirds agreed that the Fed will hike three times. Markets, however, remain more skeptical. Fed fund futures currently price in the odds of reaching the 2.00%-2.25% range by December 2018 at only about 37%. Market participants may well be focusing on the fact that policymakers have mentioned several times that they are closely watching to see if subdued levels of inflation will begin to react, while they have also stressed that planned “gradual” hikes will be “data-dependent”.