Fed less worried about lower oil price as it targets core inflation – Danske Bank

FXStreet (Delhi) - Research Team at Danske Bank, suggests that the Fed is less concerned about oil price developments than other central banks, as it targets core inflation, although it has said it would like to see oil prices stabilising.

Key Quotes

“We expect PCE core inflation to move gradually towards the 2% target given the current oil forward curve. As monetary policy works with a lag, the Fed is instead focused very much on the Phillips curve. We expect the labour market to tighten further leading to higher wage growth.

Higher wage inflation implies higher underlying inflationary pressure. Thus, we continue to expect three hikes this year and four next year. In our view, markets underestimate the number of hikes in coming years.”