8 Jan 2015
FOMC minutes supportive for a probable rate hike in 2Q15 – ING
FXStreet (Barcelona) - Rob Carnell of ING, believes that yesterday’s FOMC minutes supportive the forecast for a probable rate hike in 2Q15, and anticipates the year end range to be 75-100bp, up from 50-75bp.
Key Quotes
“The minutes of the December FOMC meeting confirm the relatively buoyant tone of that meeting's FOMC statement, and also the subsequent press briefing given by Chair Yellen. The minutes reveal that the committee saw the risks to growth and the labour market as being nearly balanced, and far from being problematic, the committee felt that the decline in oil prices was positive both for the US domestic economy, and on the whole for the overseas economy.”
“In terms of the timing of the first rate hike, there was a little discussion that the use of the word "patient", expressed as meaning no rate hike for "at least" 2 meetings, unhelpfully ruled out the possibility of an earlier hike if necessary, though the balancing argument for later hikes under weaker conditions was also made, and there no bias suggested.”
“Recognising that the headline inflation rate may be about to fall considerably as a result of falling oil prices, the minutes also hinted at a switch to the core rate as the Fed's main near-term focus, saying that rates could be increased if core inflation were close to (not at or above, just close to) current levels, so long as the FOMC felt confident that inflation would return to its 2% target in the medium term.”
“All in all, the minutes support our recent move to bring forward our forecast for the first rate hike to 2Q15, and for the range at the end of the year to be 75-100bp - up from 50- 75bp. This is in line with market expectations, but given what the Fed said about them, even this might be a bit low.”
Key Quotes
“The minutes of the December FOMC meeting confirm the relatively buoyant tone of that meeting's FOMC statement, and also the subsequent press briefing given by Chair Yellen. The minutes reveal that the committee saw the risks to growth and the labour market as being nearly balanced, and far from being problematic, the committee felt that the decline in oil prices was positive both for the US domestic economy, and on the whole for the overseas economy.”
“In terms of the timing of the first rate hike, there was a little discussion that the use of the word "patient", expressed as meaning no rate hike for "at least" 2 meetings, unhelpfully ruled out the possibility of an earlier hike if necessary, though the balancing argument for later hikes under weaker conditions was also made, and there no bias suggested.”
“Recognising that the headline inflation rate may be about to fall considerably as a result of falling oil prices, the minutes also hinted at a switch to the core rate as the Fed's main near-term focus, saying that rates could be increased if core inflation were close to (not at or above, just close to) current levels, so long as the FOMC felt confident that inflation would return to its 2% target in the medium term.”
“All in all, the minutes support our recent move to bring forward our forecast for the first rate hike to 2Q15, and for the range at the end of the year to be 75-100bp - up from 50- 75bp. This is in line with market expectations, but given what the Fed said about them, even this might be a bit low.”