30 Mar 2015
High probability of a Fed hike in September, but risks tilted for an earlier move – Danske
FXStreet (Barcelona) - Signe Roed-Frederiksen, Senior Analyst at Danske Bank, highlights the key points of Fed Chair Yellen's speech delivered on Friday, and further views that Fed is likely to start its hike in September, but risks are tilted for an earlier hike.
Key Quotes
“It is the improvement in labour market conditions that makes a rate hike this year appropriate. Yellen also refers to the fact that monetary policy works with a lag, which means it is too late to raise rates once both of the Fed’s objectives are met.”
“In particular, it is interesting that Yellen highlights that it is first and foremost further improvement in the labour market which will make her convinced that inflation is moving in direction of their 2% target.”
“She goes on to saying that an increase in core inflation is not a precondition for her to judge that a first rate hike is warranted.”
“She also states that further weakening in core inflation, wages and inflation expectations would likely postpone the first rate hike.”
“A stabilisation in various inflation measures combined with above 200,000 new jobs on average created in the coming months is likely to be the recipe for lift off this year.”
“We continue to place the largest probability on September, but do see a risk that the hike could come earlier.”
“Bottom line: the speech shows a Fed Chair that seems pretty confident that a first rate hike is coming this year but who also wants to make sure that the market understands (and prices) that the pace of hikes is likely to be gradual.”
Key Quotes
“It is the improvement in labour market conditions that makes a rate hike this year appropriate. Yellen also refers to the fact that monetary policy works with a lag, which means it is too late to raise rates once both of the Fed’s objectives are met.”
“In particular, it is interesting that Yellen highlights that it is first and foremost further improvement in the labour market which will make her convinced that inflation is moving in direction of their 2% target.”
“She goes on to saying that an increase in core inflation is not a precondition for her to judge that a first rate hike is warranted.”
“She also states that further weakening in core inflation, wages and inflation expectations would likely postpone the first rate hike.”
“A stabilisation in various inflation measures combined with above 200,000 new jobs on average created in the coming months is likely to be the recipe for lift off this year.”
“We continue to place the largest probability on September, but do see a risk that the hike could come earlier.”
“Bottom line: the speech shows a Fed Chair that seems pretty confident that a first rate hike is coming this year but who also wants to make sure that the market understands (and prices) that the pace of hikes is likely to be gradual.”