HSBC now sees two Fed rate hikes in 2017

Strategists at HSBC revised their call for US interest rates in 2017 higher, telling clients to expect two more 25 basis point hikes following the one at December´s policy meeting and another in 2018.

HSBC chief economist Kevin Logan and economist Ryan Wang said "modest" fiscal stimulus in the States beginning in the second half of 2017 would see the country´s rate of economic growth reach 2.3% in 2017 and 2.7% in 2018.

That was in comparison to the investment bank´s previous forecasts for growth of 2.1% and 2.2%, respectively.

Previously, HSBC had expected an interest rate hike on 14 December, followed by another in the last quarter of 2017 and a further 25 basis point increase at the end of 2018.

The 100 basis point increase in policy rates would entail a "significant" tightening in monetary conditions in comparison to the recent extended period of near-zero interest rates, HSBC said in the research report sent to clients and dated 21 November.

That might be offset by higher equity valuations and easier bank lending conditions, depending on whether the Trump Administration moves to a "light touch" regualtory regime for banks and businesses.

Among the risks to their outlook, they highlighted the uncertainty about if Trump would follow-through on campaign promises to substantially raise trade tariffs.

A further rapid appreciation in the value of the US dollar versus the currencies of America´s main trading partners was another risk, they said.

It could potentially offset the stimulative effects of fiscal policy changes.