Central Banks: Rate hike looming led by the Fed – BNP Paribas

Analysts at BNP Paribas explain that in the US, ongoing strong growth and a very low unemployment rate pave the way for more rate hikes.

Key Quotes

“We expect 1 more this year and 1 in the first half of 2019 after which the Fed will want to see how the economy reacts. As a consequence, US treasury yields should increase, although to a limited degree: the market expects that the tightening cycle is already well advanced.”

“The ECB has announced it intends to stop its net asset purchases at the end of 2018. A first hike of the deposit rate is expected after the summer of 2019. As a consequence, bond yields should increase.”

“No change expected in Japan.”

“The narrowing bond yield differential between the US and the eurozone should cause a strengthening of the euro, all the more so considering it is still below its long-term fair value (around 1.34).”