Fed concerned about inflation outlook and global headwinds – Danske Bank

FXStreet (Delhi) – Mikael Olai Milhøj, Analyst at Danske Bank, notes that the FOMC minutes from the September meeting showed a greater concern on the inflation outlook and confirmed that although the domestic economy is in good shape, the US economy is facing headwinds from China and emerging markets.

Key Quotes

“The FOMC thought ‘it was prudent to wait for additional information confirming that the economic outlook had not deteriorated and bolstering members’ confidence that inflation would gradually move up toward 2% over the medium term’.”

“The FOMC thinks that the recent turmoil is ‘likely to put further downward pressure on inflation in the near term’. Despite some members stating that they still see a lift-off later this year, we think the minutes support our view that the first hike will be pushed into the beginning of next year. We expect the first hike in January.”

“Initial jobless claims in the US fell to 263k from 276k and thus continued the downward trend. Lay-offs do not appear to have picked up (yet?) despite the very weak job report in September, which showed that hiring has slowed. The US labour market still seems to be in good shape and the unemployment rate is likely to crawl below NAIRU soon.”

Mikael Olai Milhøj, Analyst at Danske Bank, notes that the FOMC minutes from the September meeting showed a greater concern on the inflation outlook and confirmed that although the domestic economy is in good shape, the US economy is facing headwinds from China and emerging markets.

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