FOMC Preview: Putting your money where your mouth is - ABN AMRO

"The FOMC is widely expected to hike a further 25bp this Wednesday, taking the target range for the fed funds rate to 2.25-2.50%," note ABN Amro senior economist Bill Diviney.

Key quotes

"We expect a fall in the ‘dots’ to signal two further rate hikes in 2019 (down from three), but for 2020 to be unchanged at one rate hike. We also expect some tweaks to the statement, particularly regarding the need for ‘further gradual increases’ in rates, which was hinted at in the November minutes."

"We expect some qualifiers to be added to this statement to suggest we are approaching the end of the rate hike cycle (for instance, that further increases may yet be needed), but that the tightening bias will nonetheless remain. This would be consistent with the approach taken towards the end of the 2004-6 rate hike cycle."

"While market pricing for fed rate hikes has declined significantly – with just half an additional rate hike in 2019 now priced in by OIS forwards – consensus has shifted more slowly, with the latest Bloomberg survey (14 December) continuing to show an expectation of three further rate hikes over 2019-20 (though the timing has been pushed back somewhat). Following the recent shift dovish shift in Fed communication, we revised our already below-consensus forecast for rate hikes to just one hike in 2019, down from two previously."