16 Jun 2015
FOMC Meeting: Will the Fed act on bitter data? - ING
FXStreet (Barcelona) - Rob Carnell, Chief International Economist at ING, notes that the mixed data out of US suggests any marked positive shift in Fed’s stance in the June FOMC Meeting will be surprising.
Key Quotes
“The point about data dependency, now we have finally moved on from forward guidance (thank goodness, what a waste of time that was) is that we are now living from meeting to meeting. But so too is the Fed. So a few decent data prints, and let’s face it, that is all there has been this quarter (the May labour report, retail sales. consumer confidence, and home-builder confidence), don’t represent, to us, a sufficiently strong signal for the Fed to hurdle its new self-imposed constraint of data dependency."
“The Iatest disappointment in terms of industrial production for May is a helpful and timely reminder that we still lack a clear steer in terms of the economic direction in the US, and it is no real difficulty to forecast rates to stay unchanged in June.”
“If the data runs consistently strong in June / July, then the economic conditions might well be enough for a July hike, or if a bit unclear could open up September, currently the market favourite for the first Fed rate hike.”
“But we are unlikely to get any signal of that intent either. Why? Well let’s face it, the Fed has no idea where the data is headed on a month-by-month basis. And though the Fed might say something like, “…another month or so of decent data could see us hiking next meeting…” – it is a) unlikely to be so explicit, and b) isn’t that what data dependency means anyway? What is that adding? Indeed, the last minutes noted that the Fed were unlikely to be giving “meeting-ahead” steerage, and that makes sense when you are just as clueless about the outlook as everyone else. That is not being rude. It is just being realistic.”
“The June FOMC meeting will deliver the next set of Fed dot diagrams, but what they were saying in March is so hawkish compared to a) what the Fed is hinting in words and b) what the market is pricing in, that anything other than a fairly substantial decline in the dots will already be largely priced in. This is not to say that there will be no dollar softening on the back of a downward dot revision, but we suspect that markets won’t be too surprised by a change of this nature, and have long-since stopped looking at the dot diagram for guidance.”
Key Quotes
“The point about data dependency, now we have finally moved on from forward guidance (thank goodness, what a waste of time that was) is that we are now living from meeting to meeting. But so too is the Fed. So a few decent data prints, and let’s face it, that is all there has been this quarter (the May labour report, retail sales. consumer confidence, and home-builder confidence), don’t represent, to us, a sufficiently strong signal for the Fed to hurdle its new self-imposed constraint of data dependency."
“The Iatest disappointment in terms of industrial production for May is a helpful and timely reminder that we still lack a clear steer in terms of the economic direction in the US, and it is no real difficulty to forecast rates to stay unchanged in June.”
“If the data runs consistently strong in June / July, then the economic conditions might well be enough for a July hike, or if a bit unclear could open up September, currently the market favourite for the first Fed rate hike.”
“But we are unlikely to get any signal of that intent either. Why? Well let’s face it, the Fed has no idea where the data is headed on a month-by-month basis. And though the Fed might say something like, “…another month or so of decent data could see us hiking next meeting…” – it is a) unlikely to be so explicit, and b) isn’t that what data dependency means anyway? What is that adding? Indeed, the last minutes noted that the Fed were unlikely to be giving “meeting-ahead” steerage, and that makes sense when you are just as clueless about the outlook as everyone else. That is not being rude. It is just being realistic.”
“The June FOMC meeting will deliver the next set of Fed dot diagrams, but what they were saying in March is so hawkish compared to a) what the Fed is hinting in words and b) what the market is pricing in, that anything other than a fairly substantial decline in the dots will already be largely priced in. This is not to say that there will be no dollar softening on the back of a downward dot revision, but we suspect that markets won’t be too surprised by a change of this nature, and have long-since stopped looking at the dot diagram for guidance.”