25 Feb 2015
Fed might hike rates in June, but ‘patient’ will survive till March – ING
FXStreet (Barcelona) - Rob Carnell of ING, shares the key points out of Yellen’s testimony, expecting to see the reference to ‘patient’ in the March meeting and the rate liftoff to begin in June.
Key Quotes
“We viewed Yellen's options with respect to her Senate testimony to be threefold:
1) either no change to the referenece to the Fed remaining "patient", a codeword previously meaning "at least" two more FOMC meetings before rates were increased,
2) a "qualification" to open the door to dropping reference to the "p"-word in March, or
3) to entirely drop the word "patient" altogether.”
“It looks like she has opted for something between option one and two. The word "patient" remains, but it is set in the past tense as what the FOMC judged appropriate in January and December. It does not imply that it will do so again in March, neither does it imply that they won't.”
“Moreover, there is a further clarification of the forward guidance to suggest that modification should not be taken to mean that the target range will be increased in a "couple" of meetings but instead, "...soon...be warranted at any meeting...". This looks like it could mean a change at the following meeting after a change the guidance.”
“If this is so, we could see the reference to "patient" survive the March meeting, but rates still go up in June. If this is forward guidance, we would rather not have any.”
Key Quotes
“We viewed Yellen's options with respect to her Senate testimony to be threefold:
1) either no change to the referenece to the Fed remaining "patient", a codeword previously meaning "at least" two more FOMC meetings before rates were increased,
2) a "qualification" to open the door to dropping reference to the "p"-word in March, or
3) to entirely drop the word "patient" altogether.”
“It looks like she has opted for something between option one and two. The word "patient" remains, but it is set in the past tense as what the FOMC judged appropriate in January and December. It does not imply that it will do so again in March, neither does it imply that they won't.”
“Moreover, there is a further clarification of the forward guidance to suggest that modification should not be taken to mean that the target range will be increased in a "couple" of meetings but instead, "...soon...be warranted at any meeting...". This looks like it could mean a change at the following meeting after a change the guidance.”
“If this is so, we could see the reference to "patient" survive the March meeting, but rates still go up in June. If this is forward guidance, we would rather not have any.”