SocGen revises its Fed call, says only 1 rate hike is coming in 2016

Societe Generale has cut its expectations for the Federal Reserve.

Societe Generale Global Head of Economics Michala Marcussen said in a note Friday that the Fed will only get in one additional rate hike in this year.

"We now expect only one hike at the end of this year," wrote Marcussen.

"The Fed may try to hike earlier if market volatility subsides, however as the taper and lift-off have taught us, repricing of market expectations is likely to be challenging and it will probably take longer than the Fed would like."

The Fed raised rates for the first time in 9 years back in December.

Marcussen emphasized that while she is changing her expectations, the Fed will most likely be reluctant to do so.

"Importantly, we do NOT expect the dots to converge to our new scenario in one go," said the note. "The Fed's bias is still for hikes and removing them from the FOMC's scenario will probably be done incrementally. This is very important for market sentiment."

Volatility will persist in the market, Marcussen thinks, and the Fed will not move too much. She did predict, however, that the Fed will be able to get off 4 hikes in 2017 to a level of 1.875% before having to cut again in 2018, which means "the 'lost' hikes are not made up."

As conditions in the stock market have deteriorated, so too have economists expectations for the number of interest rate hikes from the Federal Reserve this year.

While the Fed has insisted, based on its dot plot, that there are 4 hikes coming over the course of 2016, many economists believe there is a small likelihood that comes to pass.

At this point, the Fed Funds futures market is pricing in no rate hikes this year and everyone from Goldman Sachs to JP Morgan is saying the Fed will not hike at its March meeting.

The Fed's next policy announcement is set for March 16.