30 Mar 2015
Fed funds rate to rise slowly over time - BTMU
FXStreet (Barcelona) - Lee Hardman, Currency Analyst at Bank of Tokyo-Mitsubishi UFJ, highlights the key points out of Fed Chair Yellen’s Friday’s speech, and further notes that US will see a gradual rate hike over the next few years, starting later this year.
Key Quotes
“In the speech Fed Chair Yellen emphasized that gradual rate hikes will be appropriate over the next few years and that a rate hike will be appropriate later this year.”
“She added that the Fed doesn’t plan a predetermined course of rate rises which will evolve depending on economic conditions. The pace of tightening could speed up, slow, pause or even reverse.”
“Fed Chair Yellen stated that the economy is seen rebounding in the coming quarters expanding somewhat faster than potential which should result in further progress towards full employment.”
“However, Fed Chair Yellen was more pessimistic when she described the US economy as “quite weak” by historical standards adding that it should be booming if underlying conditions have truly returned to normal given interest rates are so low.”
“She was even more downbeat when she noted that progress on price stability has been “notably absent”.”
“On top of that she added that she would be “uncomfortable” raising rates if data on wage growth and core inflation were weaken or if inflation expectation measures fell further. On the other hand, “a significant pick up in incoming readings on core inflation will not be pre-conditions to judge that an initial increase in the Fed funds rate would be warranted if there is continued improvement in the labour market.”
“The release of the latest payrolls report this week will be scrutinized closely to assess if employment continues to expand strongly despite the recent slowdown in growth.”
“It was notable that Fed Chair Yellen highlighted that the equilibrium real Fed funds rate” is set to rise only slowly over time.”
Key Quotes
“In the speech Fed Chair Yellen emphasized that gradual rate hikes will be appropriate over the next few years and that a rate hike will be appropriate later this year.”
“She added that the Fed doesn’t plan a predetermined course of rate rises which will evolve depending on economic conditions. The pace of tightening could speed up, slow, pause or even reverse.”
“Fed Chair Yellen stated that the economy is seen rebounding in the coming quarters expanding somewhat faster than potential which should result in further progress towards full employment.”
“However, Fed Chair Yellen was more pessimistic when she described the US economy as “quite weak” by historical standards adding that it should be booming if underlying conditions have truly returned to normal given interest rates are so low.”
“She was even more downbeat when she noted that progress on price stability has been “notably absent”.”
“On top of that she added that she would be “uncomfortable” raising rates if data on wage growth and core inflation were weaken or if inflation expectation measures fell further. On the other hand, “a significant pick up in incoming readings on core inflation will not be pre-conditions to judge that an initial increase in the Fed funds rate would be warranted if there is continued improvement in the labour market.”
“The release of the latest payrolls report this week will be scrutinized closely to assess if employment continues to expand strongly despite the recent slowdown in growth.”
“It was notable that Fed Chair Yellen highlighted that the equilibrium real Fed funds rate” is set to rise only slowly over time.”