FXStreet (Bali) – Philip Marey, Senior US Strategist at Rabobank, provides its take on the annual Kansas City Fed symposium in Jackson Hole (WY), with the timely theme ‘Inflation dynamics and monetary policy’, and due to start later today.
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Today sees the start of the annual Kansas City Fed symposium in Jackson Hole (WY), with the timely theme ‘Inflation dynamics and monetary policy’. Unfortunately, Fed Chair Janet Yellen won’t give a speech, which downgrades this event from a financial markets perspective. The program of the symposium will be made public at 6:00 PM Mountain Time (which should be 2:00AM CET tomorrow).
Talking about ‘inflation dynamics and monetary policy’, the developments in August are not likely to have increased the confidence of the Fed in the inflation outlook. The minutes of the FOMC meeting in late July revealed a lack of ‘reasonable confidence’ that inflation will move back to target over the medium term well before these events. The slowdown of the Chinese economy, the devaluation of the yuan against the US dollar, and the worldwide decline in commodity prices could further delay the return of US inflation to its 2% target.
As these events have reduced the probability of a September rate hike, they have increased the probability that the first hike will be delayed until 2016. On balance, we still think that December is the most likely date for the Fed’s policy rate lift-off. However, instead of the main risk to our outlook being an earlier hike, it has increasingly become a later hike.
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