28 Jul 2014
Little change in tone expected from Fed statement on Wednesday - ING
FXStreet (Łódź) - Rob Carnell, Chief International Economist at ING suggests that the FOMC will most probably continue tapering QE by another 10 billion dollars at this week´s meeting
Key quotes
“This will be from a furtherUS$5bn off MBS. Total QE will by then be only US$25bn a month (which let’s face it, is still quite a lot).”
“For a policy which is apparently not ‘pre-set’, all we can say is that this policy is about as pre-set as they come. Nothing that we can imagine occurring between now and then is likely to blow the Fed off this particular course.”
“As for the only output of this meeting – the statement, we see little change in the tone."
"The economic commentary will not be markedly different, coming just before the next labour market report, and so Janet Yellen can still claim that at 6.1%, the unemployment rate continues to point to labour market slack, and that low wages growth is another indication of that slack.”
“We suspect that within days, the unemployment rate may be looking rather lower, and possibly we will even see the wages numbers ticking up a fraction.”
“Moreover, whilst inflation is still trending up at a CPI level, the PCE inflation measure at 1.8% remains lower than the Fed’s target, though only fractionally so.”
“Despite this, the Fed can continue to assert that inflation remains below its long-term targets. That said, both this and the labour slack argument are beginning to wear rather thin.”
"Markets may give the FOMC the benefit of the doubt at this meeting, but come September, either the Fed will have to change its tune, and acknowledge the improvements in both labour demand and inflation, or the market will vote with its feet.”
Key quotes
“This will be from a furtherUS$5bn off MBS. Total QE will by then be only US$25bn a month (which let’s face it, is still quite a lot).”
“For a policy which is apparently not ‘pre-set’, all we can say is that this policy is about as pre-set as they come. Nothing that we can imagine occurring between now and then is likely to blow the Fed off this particular course.”
“As for the only output of this meeting – the statement, we see little change in the tone."
"The economic commentary will not be markedly different, coming just before the next labour market report, and so Janet Yellen can still claim that at 6.1%, the unemployment rate continues to point to labour market slack, and that low wages growth is another indication of that slack.”
“We suspect that within days, the unemployment rate may be looking rather lower, and possibly we will even see the wages numbers ticking up a fraction.”
“Moreover, whilst inflation is still trending up at a CPI level, the PCE inflation measure at 1.8% remains lower than the Fed’s target, though only fractionally so.”
“Despite this, the Fed can continue to assert that inflation remains below its long-term targets. That said, both this and the labour slack argument are beginning to wear rather thin.”
"Markets may give the FOMC the benefit of the doubt at this meeting, but come September, either the Fed will have to change its tune, and acknowledge the improvements in both labour demand and inflation, or the market will vote with its feet.”