30 Apr 2015
Credit Agricole: Fed rate hike in September or later – eFXnews
FXStreet (Barcelona) - The team at Credit Agricole, argue that the recent and the projected US data indicate that the Fed might being its rate lift-off in September, but risks remain tilted for a later hike, as noted by eFXnews.
Key Quotes
“The key issue for the FOMC, as we see it, is the extent to which the Q1 slowdown in growth is transitory or reflects more persistent factors. We believe that the Fed will want to see convincing evidence that transitory factors were behind much of the slowdown and that the underlying fundamentals suggest that the expected Q2 growth rebound will be sustained with above-trend growth in the second half.”
“Above-trend growth would continue to absorb labor market slack. That should contribute to an acceleration in wages that will further sustain consumer spending and likely put some upward pressure on prices.”
“We see it as highly unlikely that the FOMC would have sufficient evidence to support that scenario until sometime in the third quarter. Based on our macroeconomic outlook, we believe that the most likely scenario for the Fed is to begin the process of rate normalization in September. The risks are currently tilted towards a later rather than an earlier lift-off but a spring growth rebound, solid labor markets and constructive comments from the Fed on the incoming data flow are expected to prepare the markets for a rate hike this fall.”
“The disappointingly weak Q1 real GDP growth (+0.2%) was a mixed picture. Some of the factors behind the slowdown were likely transitory such as the harsh winter weather impact on consumer spending and logistical supply disruptions from the West Coast port slowdown that curbed production.”
“We expect a rebound in current-quarter activity from these transitory depressants. However, the weakness in business investment spending and net exports will likely linger for a while.”
“We project real GDP growth just above 2% in Q2 but accelerating further in the second half to around a 3% growth pace.”
Key Quotes
“The key issue for the FOMC, as we see it, is the extent to which the Q1 slowdown in growth is transitory or reflects more persistent factors. We believe that the Fed will want to see convincing evidence that transitory factors were behind much of the slowdown and that the underlying fundamentals suggest that the expected Q2 growth rebound will be sustained with above-trend growth in the second half.”
“Above-trend growth would continue to absorb labor market slack. That should contribute to an acceleration in wages that will further sustain consumer spending and likely put some upward pressure on prices.”
“We see it as highly unlikely that the FOMC would have sufficient evidence to support that scenario until sometime in the third quarter. Based on our macroeconomic outlook, we believe that the most likely scenario for the Fed is to begin the process of rate normalization in September. The risks are currently tilted towards a later rather than an earlier lift-off but a spring growth rebound, solid labor markets and constructive comments from the Fed on the incoming data flow are expected to prepare the markets for a rate hike this fall.”
“The disappointingly weak Q1 real GDP growth (+0.2%) was a mixed picture. Some of the factors behind the slowdown were likely transitory such as the harsh winter weather impact on consumer spending and logistical supply disruptions from the West Coast port slowdown that curbed production.”
“We expect a rebound in current-quarter activity from these transitory depressants. However, the weakness in business investment spending and net exports will likely linger for a while.”
“We project real GDP growth just above 2% in Q2 but accelerating further in the second half to around a 3% growth pace.”