19 Feb 2015
FOMC minutes confirm a Q4 2015 rate hike call? – Rabobank
FXStreet (Barcelona) - The Rabobank Team shares the key details regarding inflation outlook as noted in the FOMC minutes, and further maintain their Q4 2015 rate hike call.
Key Quotes
“Although the FOMC still sees US disinflation as temporary, they would like to see more evidence of inflation returning to its 2.0% target before hiking the fed funds rate.”
“A number of participants would need to see either an increase in market-based measures of inflation expectations or evidence that low readings did not constitute grounds for concern. Some participants noted that their confidence in inflation returning to 2% would also be bolstered by stable or rising levels of core PCE inflation.”
“As usual, several participants saw improvements in labor compensation as an important signal, while others questioned the link between wage and price inflation.”
“Besides concerns about disinflation, the FOMC minutes also revealed some hesitancy about dropping the ‘patient’ language in the statement, because it could shift market expectations for the first rate hike toward an unduly narrow range of dates. As a result, some expressed the concern that markets might overreact, resulting in undesirably tight financial conditions.”
“The minutes also mentioned that many participants are inclined toward keeping the fed funds rate at current levels ‘for a longer time’, although this could still be consistent with a mid-2015 rate hike.”
“Nevertheless, the minutes confirmed our doubts about a rate hike as soon as June, and we stick to our Q4 call.”
Key Quotes
“Although the FOMC still sees US disinflation as temporary, they would like to see more evidence of inflation returning to its 2.0% target before hiking the fed funds rate.”
“A number of participants would need to see either an increase in market-based measures of inflation expectations or evidence that low readings did not constitute grounds for concern. Some participants noted that their confidence in inflation returning to 2% would also be bolstered by stable or rising levels of core PCE inflation.”
“As usual, several participants saw improvements in labor compensation as an important signal, while others questioned the link between wage and price inflation.”
“Besides concerns about disinflation, the FOMC minutes also revealed some hesitancy about dropping the ‘patient’ language in the statement, because it could shift market expectations for the first rate hike toward an unduly narrow range of dates. As a result, some expressed the concern that markets might overreact, resulting in undesirably tight financial conditions.”
“The minutes also mentioned that many participants are inclined toward keeping the fed funds rate at current levels ‘for a longer time’, although this could still be consistent with a mid-2015 rate hike.”
“Nevertheless, the minutes confirmed our doubts about a rate hike as soon as June, and we stick to our Q4 call.”