FOMC: No strong signal of change - Lloyds

Analysts from Lloyds Bank point out that today’s event at the Federal Reserve gave no strong signal of a change in policy. They expect a rate hike in September.

Key Quotes:

“The Fed’s decision to keep policy unchanged at its June meeting came as no surprise after the weak May employment data. Of more interest was whether the Committee would provide any new guidance on the future path for policy rates. The message was actually little changed. This was that they expect to raise interest rates in the second half of the year. There was, however, no strong signal of an early change in policy.”

“Indeed, six FOMC participants now favour only raising interest rates once this year compared with only one member back in March. This suggests that an increasing number of members are in no hurry to make a move.”

“Nevertheless it should be noted that a majority of FOMC participants still favour raising interest rates two times this year. This suggests that an interest rate hike at the next meeting in July is unlikely but a move at the September meeting remains a stronger possibility.”

“If, as we forecast, US employment growth picks up again in June and other economic data improves over the next couple of months, we expect a 0.25% rate rise in September and a similar move late in the year. However, as today’s key message is that, while the FOMC expects to raise interest rates, they are in no hurry to do so there is clearly a risk that these interest rate moves will take longer to occur.”