2 Feb 2015
Fed liftoff in Sept more likely than June - Nomura
FXStreet (Bali) - Nomura Economists continue to believe that a liftoff by the Fed in September is more likely than June.
Key Quotes
"The FOMC did not really acknowledge any additional risk in its outlook beyond the near term downdrafts on inflation. The fact that the Committee indicated it was monitoring “international developments” is not surprising and does not, in our judgment, suggest that its base case for the economy has deteriorated or does it mean its level of concern has increased. To be sure, according to the December FOMC minutes, many participants already “regarded the international situation as an important source of downside risks.”
"With no major changes to its policy in January, one way or another, the March FOMC meeting is likely to be consequential. If the Committee is going ahead with a June “liftoff,” it will likely indicate that at the March meeting. On the other hand, if the FOMC decides to take a June interest rate increase off the table, it will likely signal that in March as well. The evolution of the FOMC’s outlook, driven by the data and reflected in the public comments of FOMC participants, will be closely watched by market participants."
"The bottom line is that the FOMC did not signal any change in its expectations for the trajectory of policy in its January statement. That means it is keeping open the option to raise rates at its June meeting. Given the recent data and our outlook for inflation, we continue to believe that a liftoff in September is more likely than June."
Key Quotes
"The FOMC did not really acknowledge any additional risk in its outlook beyond the near term downdrafts on inflation. The fact that the Committee indicated it was monitoring “international developments” is not surprising and does not, in our judgment, suggest that its base case for the economy has deteriorated or does it mean its level of concern has increased. To be sure, according to the December FOMC minutes, many participants already “regarded the international situation as an important source of downside risks.”
"With no major changes to its policy in January, one way or another, the March FOMC meeting is likely to be consequential. If the Committee is going ahead with a June “liftoff,” it will likely indicate that at the March meeting. On the other hand, if the FOMC decides to take a June interest rate increase off the table, it will likely signal that in March as well. The evolution of the FOMC’s outlook, driven by the data and reflected in the public comments of FOMC participants, will be closely watched by market participants."
"The bottom line is that the FOMC did not signal any change in its expectations for the trajectory of policy in its January statement. That means it is keeping open the option to raise rates at its June meeting. Given the recent data and our outlook for inflation, we continue to believe that a liftoff in September is more likely than June."