Fed: Timing of first rate hike is critical - Nomura

FXStreet (Bali) - The timing of the first rate hike—along with the economic conditions prevailing at the time—is critical for the Fed, notes Richard Koo, chief economist at Nomura Research Institute.

Key Quotes

"The timing of the first rate hike—along with the economic conditions prevailing at the time—is critical. Once the Fed begins its mechanical tightening process, stopping before the goal is reached could upset the markets."

"Given the importance of getting the timing right, the FOMC needs to be absolutely sure that tightening is the right thing to do.
On this point, three of the members on the rate-setting committee have already argued that the Fed should tighten, while Chair Yellen and the rest of the members believe the start of this long 375bp journey is similar to a rocket launch in that all conditions need to be favorable."

"Interestingly, these people are referring to the first rate hike as “lift-off,” which is the termused to describe the moment the rocket leaves its launching pad. This is an indication of how careful the Fed will have to be when pushing the button on a rate increase