20 Feb 2015
Yellen likely to deviate the market away from a June ‘liftoff’ – Nomura
FXStreet (Barcelona) - Research Analysts at Nomura, comments on the FOMC Minutes, noting that the previously anticipated timing of the rate liftoff has likely shifted, further expecting Fed to hike rates in September than June.
Key Quotes
“The likely timing of liftoff has shifted. We still think that September is the most likely timing for the first rate hike. After the minutes we think the probability of an increase in June has gone down, and that the probability that the first hike will come after September has gone up.”
“The likelihood that the FOMC retains the “patient” language in the next (March) FOMC statement has gone up. We now think that they are more likely to retain it than to drop it.”
“The apparent disagreements among FOMC participants heighten the importance of Chair Yellen upcoming Congressional testimony on 24 February. We doubt that she will promise that the FOMC will reiterate a “patient” approach at the next meeting or that she will rule out an interest rate increase in June.”
“But we suspect that she will characterize the risks around those choices in a way that suggest the “patient” language is likely to be retained and that “liftoff” in June is not the most likely outcome.”
Key Quotes
“The likely timing of liftoff has shifted. We still think that September is the most likely timing for the first rate hike. After the minutes we think the probability of an increase in June has gone down, and that the probability that the first hike will come after September has gone up.”
“The likelihood that the FOMC retains the “patient” language in the next (March) FOMC statement has gone up. We now think that they are more likely to retain it than to drop it.”
“The apparent disagreements among FOMC participants heighten the importance of Chair Yellen upcoming Congressional testimony on 24 February. We doubt that she will promise that the FOMC will reiterate a “patient” approach at the next meeting or that she will rule out an interest rate increase in June.”
“But we suspect that she will characterize the risks around those choices in a way that suggest the “patient” language is likely to be retained and that “liftoff” in June is not the most likely outcome.”