19 Feb 2015
FOMC could still hike in the summer – Danske Bank
FXStreet (Edinburgh) - In light of the recent dovish minutes from the FOMC meeting in late January, analysts at Danske Bank still believe in a rate hike during the summer.
Key Quotes
“The minutes from the January FOMC meeting strongly suggest that the FOMC’s fed funds rate projections will be lowered at the upcoming 18 March meeting and the minutes were in general more dovish than recent Fed speeches”.
“Data received since the FOMC meeting on 28 January includes the January employment report, which was very strong. However, we doubt that one data point is enough to turn the Committee’s sentiment, in particular when inflation indicators continue to be soft”.
“This challenges our call that the Fed will remove ‘patient’ from the statement in March and raise the fed funds rate this summer”.
“If February data on employment continue to show solid improvement and inflation indicators stabilise, we continue to believe the Fed would like to have the flexibility to raise rates in June”.
“Hence, ‘patient’ should be dropped in March but will be combined with soft comments from Janet Yellen and lower economic projections in order to keep the market reaction moderate”.
Key Quotes
“The minutes from the January FOMC meeting strongly suggest that the FOMC’s fed funds rate projections will be lowered at the upcoming 18 March meeting and the minutes were in general more dovish than recent Fed speeches”.
“Data received since the FOMC meeting on 28 January includes the January employment report, which was very strong. However, we doubt that one data point is enough to turn the Committee’s sentiment, in particular when inflation indicators continue to be soft”.
“This challenges our call that the Fed will remove ‘patient’ from the statement in March and raise the fed funds rate this summer”.
“If February data on employment continue to show solid improvement and inflation indicators stabilise, we continue to believe the Fed would like to have the flexibility to raise rates in June”.
“Hence, ‘patient’ should be dropped in March but will be combined with soft comments from Janet Yellen and lower economic projections in order to keep the market reaction moderate”.