US: More rate hikes – BNP Paribas

According to analysts at BNP Paribas, ongoing above potential growth of the US economy, in conjunction with a very low unemployment rate and a pick-up in wage growth point towards more rate hikes.

Key Quotes

“Our forecasts still point towards 2 more in the first half of 2019 after which the Fed will want to see how the economy reacts. However this scenario has become less clearcut considering dovish message from FOMC members and its president.”

“The ECB has ended 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).”