Fed Williams in wait-and-see mode, but September liftoff still possible – Deutsche Bank

FXStreet (Barcelona) – Fed Williams in his recent speech maintained his expectations for two Fed rate hikes in this year, and further sees likelihood of a September liftoff, according to the Research Team at Deutsche Bank.

Key Quotes

“In a speech earlier, San Francisco Fed President John Williams, who is a voting member of the FOMC this year, reiterated his forecast for Fed liftoff in 2015. This was noteworthy because Williams’ views are generally thought to be closely aligned with those of Chair Yellen, who was his predecessor at the San Francisco Fed.”

“Williams highlighted the fact that the Fed’s employment goal was “in sight” and that the labor market was making good progress across a broad range of indicators. In comments to the press following the speech, Williams indicated that he had not changed his expectation of two rate hikes in 2015 and thought that there would be enough data by September for the FOMC to make a decision regarding liftoff.”

“Since Williams was speaking at the International Conference of Commercial Bank Economists, he took the opportunity to address concerns about Greece and China. In his view, many of the issues in China could be addressed by fiscal and other policies. Having recently met with Chinese officials, he expressed optimism that Chinese policymakers were willing and able to take the necessary actions should growth materially deviate from their stated target.”

“With respect to Greece, he thought that the worst-case scenario of a Greek exit leading to a sizeable financial and economic impact on the global economy remained “an unlikely tail risk”. This was interesting given that the minutes of the June FOMC meeting mentioned Greece three times and China twice.”

“To be sure, the June minutes were modestly more dovish than the meeting statement and the main take-away was that the Fed remains content with to wait for more data and further improvement in the labor market. However, as the minutes stated, “Members thus saw economic conditions as continuing to approach those consistent with warranting a start to the normalization of the stance of monetary policy.” Hence, similar to Williams, we continue to expect liftoff later this year.”

Fed Williams in his recent speech maintained his expectations for two Fed rate hikes in this year, and further sees likelihood of a September liftoff, according to the Research Team at Deutsche Bank.

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