FXStreet (Barcelona) – Reviewing the FOMC meeting, the Rabobank Research Team expresses doubts on a September Fed rate hike, and maintains their December call for rate normalisation.
Key Quotes
“….when the strong Employment Report for May was released in early June, the markets switched back to September. While there will be a meeting at the end of July, the amount of data between the two subsequent meetings may not be enough to change today’s verdict. What’s more, the September meeting is the next with an update of economic projections and a press conference. This would provide the Fed a better opportunity to announce a rate hike than a meeting that is concluded only by a formal statement. Interestingly this impression of unequal meetings (those with projections and a press conference being more important) was underlined by Chair Yellen’s response during the press conference that no decision has been made about September, December or March. She did not mention July, October or January…”
“It may not be surprising to our regular readers that we have doubts about a September rate hike as well. In fact, we have maintained our December call since the start of last year. As we have pointed out before, a number of ‘transitory’ factors are still playing a role. The strong dollar remains a headwind for US exporters, and the low oil price has reduced the incentives to invest in the energy sector. What’s more, consumers are still hesitant to spend their windfall gains from cheaper energy. Therefore, we expect only a modest re-acceleration of the US economy in Q2, which should delay the Fed’s first rate hike to the final quarter of the year, most likely December.”
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