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9 Apr 2015
Fed hike might be postponed to final quarter of 2015 – Rabobank
FXStreet (Barcelona) - Philip Marey, Senior US Strategist at Rabobank, comments on the rate expectations as seen among Fed members in the FOMC Minutes, and further views that a strong USD and weak global growth might delay US rate hike to the final quarter.
Key Quotes
“Yesterday’s FOMC minutes revealed that behind the veil of ‘data dependency’ we can find a divided FOMC, with the hawks already having their minds set on a June rate hike, while the doves want to wait until later in the year and some even until next year.”
“So while the Committee may be data-dependent, there are already strong divisions about the interpretation of the data and the likely liftoff date.”
“However, we should keep in mind that at the time of the meeting, last Friday’s disappointing Employment Report (which included downward revisions to the January and February nonfarm payrolls) was not available yet. This means that the hurdle for a June rate hike has risen, although the FOMC remains data-dependent.”
“If we were to see very strong data in the coming weeks, a June hike would still be possible.”
“However, Rabobank’s expectation is that the impact of weak global economic growth and the strong US dollar on the US economy will delay the first hike to the final quarter of the year.”
“The shape of the hiking cycle will also be data-dependent: policy tightening could speed up, slow down, pause, or even reverse course depending on the outlook for real activity and inflation. In addition, the target level of the hiking cycle may also be moving.”
Key Quotes
“Yesterday’s FOMC minutes revealed that behind the veil of ‘data dependency’ we can find a divided FOMC, with the hawks already having their minds set on a June rate hike, while the doves want to wait until later in the year and some even until next year.”
“So while the Committee may be data-dependent, there are already strong divisions about the interpretation of the data and the likely liftoff date.”
“However, we should keep in mind that at the time of the meeting, last Friday’s disappointing Employment Report (which included downward revisions to the January and February nonfarm payrolls) was not available yet. This means that the hurdle for a June rate hike has risen, although the FOMC remains data-dependent.”
“If we were to see very strong data in the coming weeks, a June hike would still be possible.”
“However, Rabobank’s expectation is that the impact of weak global economic growth and the strong US dollar on the US economy will delay the first hike to the final quarter of the year.”
“The shape of the hiking cycle will also be data-dependent: policy tightening could speed up, slow down, pause, or even reverse course depending on the outlook for real activity and inflation. In addition, the target level of the hiking cycle may also be moving.”