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| FED to Raise Interest Rates Despite Banking Sector Jitters, Says Danske Bank Analysts |
Despite recent turmoil in the banking sector, analysts at Danske Bank believe that the Federal Reserve will raise interest rates by 25 basis points in its upcoming monetary policy announcement. The bank emphasized that the Fed cannot afford to stop tightening monetary policy and that there is no trade-off between inflation and financial stability risks.
According to Danske Bank, short-term real rates and broader financial conditions have remained relatively stable, with their in-house "growth tax" measure at modestly restrictive territory. As long as macro data remains strong, the bank expects the Fed to continue with its current course of action. They predict a 25 basis point rate hike next week and a terminal rate at 5.00-5.25% in May, with modest upside risks to short-term rates from current levels.
Danske Bank's prediction goes against the recent market volatility, particularly in the banking sector, which has led some to question whether the Fed will adjust its plans. However, the bank believes that the Fed will remain committed to its current strategy and continue to raise interest rates.
