30 Apr 2015
Expecting a September Fed rate hike – Investec
FXStreet (Barcelona) - Jonathan Pryor, Head of FX dealing at Investec, reviews the FOMC statement and further comments on the US growth scenario.
Key Quotes
“As expected, the Fed kept policy on hold last night with the Fed funds target rate held in the 0-0.25% range. Reflecting yesterday's weak Q1 US GDP figures, the FOMC policy statement highlighted the slowing in growth in the winter months and the little change seen in labour underutilisation since the last meeting. The statement did though flag that the recent weakness has been partly due to transitory factors and that the FOMC expects a moderate pace of growth from here.”
“The mood looks to be one of the Fed now watching and waiting to see what improvement emerges in Q2 data. There is very little hint of what the Fed's next policy move will be (in terms of revisions to guidance and rates lift-off), though certainly an early or mid-summer move is looking less and less likely.”
“However, we would caution against getting too carried away in assuming the first Fed hike has fallen well of the agenda; if the data does begin to rebound over the next two months we could see lift-off for rates signalled at the June/July meetings. Our forecast for the first Fed funds hike is September.”
“As touched on above, the US economy showed almost no growth in the first quarter of 2015, with the 1st estimate standing at just +0.2% on an annualised basis. Market expectations had been for a figure of 1.0%. As we suspected severe winter weather was a major factor here, but additionally the West Coast Ports dispute, a stronger dollar and lower energy prices were cited as reasons for the slowdown by the Commerce Department.”
“To our minds Q1’s weakness should be temporary due to special factors and that a rebound should be seen in Q2.”
Key Quotes
“As expected, the Fed kept policy on hold last night with the Fed funds target rate held in the 0-0.25% range. Reflecting yesterday's weak Q1 US GDP figures, the FOMC policy statement highlighted the slowing in growth in the winter months and the little change seen in labour underutilisation since the last meeting. The statement did though flag that the recent weakness has been partly due to transitory factors and that the FOMC expects a moderate pace of growth from here.”
“The mood looks to be one of the Fed now watching and waiting to see what improvement emerges in Q2 data. There is very little hint of what the Fed's next policy move will be (in terms of revisions to guidance and rates lift-off), though certainly an early or mid-summer move is looking less and less likely.”
“However, we would caution against getting too carried away in assuming the first Fed hike has fallen well of the agenda; if the data does begin to rebound over the next two months we could see lift-off for rates signalled at the June/July meetings. Our forecast for the first Fed funds hike is September.”
“As touched on above, the US economy showed almost no growth in the first quarter of 2015, with the 1st estimate standing at just +0.2% on an annualised basis. Market expectations had been for a figure of 1.0%. As we suspected severe winter weather was a major factor here, but additionally the West Coast Ports dispute, a stronger dollar and lower energy prices were cited as reasons for the slowdown by the Commerce Department.”
“To our minds Q1’s weakness should be temporary due to special factors and that a rebound should be seen in Q2.”