29 Jan 2015
Fed leaves door open to raise rates from mid-year – BTMU
FXStreet (Barcelona) - Lee Hardman, FX Analyst at the Bank of Tokyo Mitsubishi UFJ, comments that Fed’s ‘patient’ stance has left doors open for a rate-hike as early as at the 17th June FOMC meeting.
Key Quotes
"Economic activity is now described as expanding at a “solid” pace with “strong” job gains. The Fed also added that “recent declines in energy prices have boosted household purchasing power” signalling more clearly that they expect lower energy prices to be a net positive for the US economy."
"In contrast, the Fed displayed greater concern over recent inflation developments which it described as having “declined further”, and “anticipated to decline further in the near-term”. However, the Fed still expects inflation to rise back towards 2.0% in the “medium-term”.”
“The Fed also acknowledged that market-based measures of inflation expectations have declined “substantially in recent months”."
"Overall, the main policy message remained largely unchanged as the Fed still believes that it can remain “patient” in beginning to normalize the stance of monetary policy.”
“The Fed added “international developments” to the range of information that it will take into account when setting monetary policy."
"The statement still leaves the door open to the Fed raising rates as early as at the 17th June FOMC meeting. As the policy statement appears more of a holding operation, Fed Chair Yellen’s upcoming semi-annual testimony in February and the 18th March FOMC meeting are likely to prove more important in signalling whether the Fed still intends to raise rates from the middle of this year which would reinforce US dollar strength."
Key Quotes
"Economic activity is now described as expanding at a “solid” pace with “strong” job gains. The Fed also added that “recent declines in energy prices have boosted household purchasing power” signalling more clearly that they expect lower energy prices to be a net positive for the US economy."
"In contrast, the Fed displayed greater concern over recent inflation developments which it described as having “declined further”, and “anticipated to decline further in the near-term”. However, the Fed still expects inflation to rise back towards 2.0% in the “medium-term”.”
“The Fed also acknowledged that market-based measures of inflation expectations have declined “substantially in recent months”."
"Overall, the main policy message remained largely unchanged as the Fed still believes that it can remain “patient” in beginning to normalize the stance of monetary policy.”
“The Fed added “international developments” to the range of information that it will take into account when setting monetary policy."
"The statement still leaves the door open to the Fed raising rates as early as at the 17th June FOMC meeting. As the policy statement appears more of a holding operation, Fed Chair Yellen’s upcoming semi-annual testimony in February and the 18th March FOMC meeting are likely to prove more important in signalling whether the Fed still intends to raise rates from the middle of this year which would reinforce US dollar strength."