27 Jan 2015
Fed might stick to its position this week, “patient” will remain as it is – ING
FXStreet (Barcelona) - Rob Carnell of ING, previews the FOMC meet, expecting that Fed might keep the “patient” term intact and hike rates only in June.
Key Quotes
“The question is, will the Fed change its position, or will they stick to it, keep the word
“patient” in the text, and expect the market to come to them? Our best guess is that it will be more of the latter than the former.”
“There is really nothing wrong with US growth right now, and the wages dip looked to us like an aberration. This happens from time to time in the US. It happened in October 2014, when US data ran soft for a month, then suddenly picked up again. This is probably no more than poor seasonal adjustment.”
“[..] the external environment looks no better than it did back in December – it will take some time to evaluate the likely success of QE in the Eurozone, and the dollar’s rapid appreciation has also reduced the need for the Fed to act hastily. As such, we see almost no need for the Fed to change the tone or content of its January statement, save perhaps to acknowledge that inflation may fall further, and remain lower for longer. But it will also likely note that the dip in inflation will be temporary, and suggest that it is the evolution of core inflation that will be more likely to shape their actions in the coming months.”
“The word “patient” most likely will survive this coming FOMC meeting, and so this takes April out of the picture, but brings a June hike (still our preferred date for the first hike) into view. A recovery in the dataflow in the next month could see markets moving in this direction too.”
Key Quotes
“The question is, will the Fed change its position, or will they stick to it, keep the word
“patient” in the text, and expect the market to come to them? Our best guess is that it will be more of the latter than the former.”
“There is really nothing wrong with US growth right now, and the wages dip looked to us like an aberration. This happens from time to time in the US. It happened in October 2014, when US data ran soft for a month, then suddenly picked up again. This is probably no more than poor seasonal adjustment.”
“[..] the external environment looks no better than it did back in December – it will take some time to evaluate the likely success of QE in the Eurozone, and the dollar’s rapid appreciation has also reduced the need for the Fed to act hastily. As such, we see almost no need for the Fed to change the tone or content of its January statement, save perhaps to acknowledge that inflation may fall further, and remain lower for longer. But it will also likely note that the dip in inflation will be temporary, and suggest that it is the evolution of core inflation that will be more likely to shape their actions in the coming months.”
“The word “patient” most likely will survive this coming FOMC meeting, and so this takes April out of the picture, but brings a June hike (still our preferred date for the first hike) into view. A recovery in the dataflow in the next month could see markets moving in this direction too.”