FXStreet (Edinburgh) – Senior US Strategist at Rabobank Philip Marey believes the Fed could start hiking rates in December.
Key Quotes
“The minutes contain several references to concerns about the impact of the strong dollar and declines in commodity prices on the inflation outlook”.
“There are also several references of the lack of wage and price pressures despite the falling labor market slack”.
“The minutes also mention that this could mean that the natural rate of unemployment could currently be lower than previously thought”.
“We would like to note that the FOMC already lowered its long run projections for the unemployment rate earlier this year and we expect that further downward revisions in the coming years”.
“In fact, there are a couple of studies by the Fed’s own research staff that support this view. The implication would be that the Fed’s hiking cycle will be slower than the dot plot currently suggests. Note that we forecast fewer rate hikes than the Fed’s projections imply”.
“With this lack of consensus on the timing of the first rate hike, and the many doubts about the inflation outlook, we continue to think that a September rate hike is less likely than a December rate hike”.
“Labor market progress is on track, but there is not likely to be a majority in the FOMC with ‘reasonable confidence’ in the inflation outlook by September”.
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