Fed speakers very cautious around US recovery and multiple rate hikes - UOB

Analysts at UOB Group noted some of the recent Fed chat.

Key Quotes:

"Chicago Fed President, Charles Evans (voter in 2017 FOMC) who was speaking at Madrid, Spain (27 Mar) said that three interest rate hikes this year is plausible, two or four hikes also possible. 

He expressed that he did not have the confidence for four rate hikes in 2017, as he would need to see much stronger lift in inflation. He also noted that the failure of healthcare bill adds to uncertainties for the US and that two interest-rate increases may be the right amount of tightening for the U.S. economy this year given uncertainty surrounding the outlook for inflation and government spending. 

On the topic of the Fed balance sheet, Evans believes that when the Fed does get to point when it wants to reduce size of the Fed’s balance sheet, the Fed should convey sense it will run off in controlled, disciplined manner. And while inflation looks well on the way to reaching Fed’s objective, Evans does not expect core price inflation to reach 2% until 2019. 

Dallas Fed President Robert S. Kaplan (voter in 2017 FOMC) who was speaking at College station, Texas (27 Mar) thinks that US 2017 GDP should be around 2.25% and that will be enough to take slack from labor market. He believed that the neutral interest rate is around 2.75%. He also expressed confidence that the US household sector is stronger and business optimism is higher."