Fed: Lack of urgency to raise rates sees market pricing of rate hikes diminish - BNZ

Jason Wong, Currency Strategist at BNZ, notes that the US Treasury rates are slightly down for the day, with much of the support following the Fed’s Brainard reiterating her dovish stance on rates.

Key Quotes

“She urged “prudence in the removal of policy accommodation” and that the “case to tighten policy pre-emptively is less compelling”.

These comments followed two other Fed speakers. Lockhart repeated his call for a “serious discussion” about raising interest rates later this month, even after some recent disappointing economic indicators. However he added that he didn’t “feel that we are incurring the costs of patience that put a lot of urgency on the question of raising rates”. Kashkari said he saw no urgency to act and preferred to see a more upward movement in core inflation.

This lack of urgency to raise rates sees market pricing of Fed rate hikes diminish, with the September meeting priced at just 5bps or a 20% probability of a 25bp hike, down from circa 30% on Friday. The probability of a hike by December has nudged down to 68%.”