29 Jan 2015
FOMC meeting, more patience – Danske
FXStreet (Barcelona) - Signe Roed-Frederiksen, Senior Analyst at Danske Bank, reviews the FOMC’s statement, and comments that the likelihood of a later hike than June 2015 has increased.
Key Quotes
“The FOMC statement had small tweaks to the language but the most important sentence - that the FOMC can be patient in beginning to normalize the stance of monetary policy - was repeated. This in effect means that rate hikes are off the table at the March and April meetings.”
“One notable change in the statement is that international developments are now mentioned directly as a part of what the FOMC watches in determining how long to maintain the fed funds rate at the current level. What exactly is meant by this phrase is unclear, but the most obvious is global economic developments. Whether it also refers to central bank actions and their impact on the US dollar is more unclear. The minutes released in three weeks will make us wiser.”
“Otherwise, the statement acknowledges the downward trend in inflation and the drop in market based inflation expectations, but remains of the view that it is driven by transitory effects.”
“This leaves us with an FOMC which seems ready to hike rates despite low and declining inflation, if it is convinced that inflation will pick up later and the labour market will continue to improve.”
“However, the mentioning of global economic developments suggests that it might not be enough for the FOMC that the domestic economy is on track, if global economic growth is faltering. This raises the likelihood of a later hike than we currently anticipate (June 2015).”
Key Quotes
“The FOMC statement had small tweaks to the language but the most important sentence - that the FOMC can be patient in beginning to normalize the stance of monetary policy - was repeated. This in effect means that rate hikes are off the table at the March and April meetings.”
“One notable change in the statement is that international developments are now mentioned directly as a part of what the FOMC watches in determining how long to maintain the fed funds rate at the current level. What exactly is meant by this phrase is unclear, but the most obvious is global economic developments. Whether it also refers to central bank actions and their impact on the US dollar is more unclear. The minutes released in three weeks will make us wiser.”
“Otherwise, the statement acknowledges the downward trend in inflation and the drop in market based inflation expectations, but remains of the view that it is driven by transitory effects.”
“This leaves us with an FOMC which seems ready to hike rates despite low and declining inflation, if it is convinced that inflation will pick up later and the labour market will continue to improve.”
“However, the mentioning of global economic developments suggests that it might not be enough for the FOMC that the domestic economy is on track, if global economic growth is faltering. This raises the likelihood of a later hike than we currently anticipate (June 2015).”