21 Oct 2015
Fed’s 2015 lift-off still on the table - Westpac
FXStreet (Delhi) – Richard Franulovich, Research Analyst at Westpac, suggests that the market implied odds for Dec lift-off have settled in the 30-35% range in recent sessions and barring a significant growth shock it seems unlikely that these odds will fall to zero.
Key Quotes
“Even with dovish commentary from Governors Brainard and Tarullo, arguing against 2015 lift-off, the overarching message from Fedspeak should leave the impression that all options remain on the table.”
“At the other end of the spectrum the Fed’s data dependence imply that lift-off odds will probably never exceed 50/50 either. That said, even if global markets stabilise and China tail risks abate in coming weeks, the risks into the 16 Dec FOMC seem skewed in the direction of ongoing subdued Fed lift-off odds.”
“The overall US data flow has stabilised recently, our US data surprise index taking a more consolidative posture lately. But, allowing for lags tighter US financial conditions seem set to keep the US data flow looking tepid at best. See chart below. The Fed may well still hike on 16 Dec but the odds in the lead up look set to remain restrained. Fed hike risk in the lead up to 16 Dec thus arguably plays USD negative / risk appetite supportive.”
Key Quotes
“Even with dovish commentary from Governors Brainard and Tarullo, arguing against 2015 lift-off, the overarching message from Fedspeak should leave the impression that all options remain on the table.”
“At the other end of the spectrum the Fed’s data dependence imply that lift-off odds will probably never exceed 50/50 either. That said, even if global markets stabilise and China tail risks abate in coming weeks, the risks into the 16 Dec FOMC seem skewed in the direction of ongoing subdued Fed lift-off odds.”
“The overall US data flow has stabilised recently, our US data surprise index taking a more consolidative posture lately. But, allowing for lags tighter US financial conditions seem set to keep the US data flow looking tepid at best. See chart below. The Fed may well still hike on 16 Dec but the odds in the lead up look set to remain restrained. Fed hike risk in the lead up to 16 Dec thus arguably plays USD negative / risk appetite supportive.”