18 Dec 2014
FOMC meeting: It all depends on the data – Danske
FXStreet (Barcelona) - Signe Roed-Frederiksen of Danske Bank, shares the Fed’s view that future decisions are likely to be dependent on incoming data, further anticipating the Fed to hike rates by mid-2015.
Key Quotes
“Overall, the combined statement, updated projections and in particular Fed Chair Yellen’s comments at the press conference leave a more hawkish feel than in October. The key take away is that any future decisions are dependent on incoming data and the FOMC does not feel precommitted to keep the funds rate at the current level for any particular period.”
“Yellen did, however, state that “the committee considers it unlikely to begin the normalization process for at least the next couple of meetings”, but beyond that, it all depends on the data.”
“Yellen also made it clear that the coming hiking cycle will not be at a measured pace as in 2004/2005, i.e. 25bp per meeting, but will be dependent on incoming data. This means that even though the fed funds rate is below the normal level at this point of the economic cycle, the pace of increase will follow the change in economic conditions. So what is the FOMC looking for before it will start hiking?”
“We also got a bit wiser on that from Yellen’s comments. Which in essence suggests that as long as the labour market continues to improve and survey based inflation expectations are stable, the Fed will most likely hike rates by midnext year.”
“In terms of the projections, the dots reflecting the fed funds rate were lowered slightly, with the median projection for 2015 now 1.125% (previous 1.375%), for 2016 2.5% (previous 2.875%) and for 2017 3.625% (previous 3.75%). The revisions to the economic projections were minor, most notable was the downward revision to the unemployment rate.”
Key Quotes
“Overall, the combined statement, updated projections and in particular Fed Chair Yellen’s comments at the press conference leave a more hawkish feel than in October. The key take away is that any future decisions are dependent on incoming data and the FOMC does not feel precommitted to keep the funds rate at the current level for any particular period.”
“Yellen did, however, state that “the committee considers it unlikely to begin the normalization process for at least the next couple of meetings”, but beyond that, it all depends on the data.”
“Yellen also made it clear that the coming hiking cycle will not be at a measured pace as in 2004/2005, i.e. 25bp per meeting, but will be dependent on incoming data. This means that even though the fed funds rate is below the normal level at this point of the economic cycle, the pace of increase will follow the change in economic conditions. So what is the FOMC looking for before it will start hiking?”
“We also got a bit wiser on that from Yellen’s comments. Which in essence suggests that as long as the labour market continues to improve and survey based inflation expectations are stable, the Fed will most likely hike rates by midnext year.”
“In terms of the projections, the dots reflecting the fed funds rate were lowered slightly, with the median projection for 2015 now 1.125% (previous 1.375%), for 2016 2.5% (previous 2.875%) and for 2017 3.625% (previous 3.75%). The revisions to the economic projections were minor, most notable was the downward revision to the unemployment rate.”