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29 Jul 2015
FOMC: door open for a rate hike – ING Bank
FXStreet (Edinburgh) - Analyst at ING Bank James Knightley reviewed the recent statement from the FOMC.
Key Quotes
“The Federal Reserve has left monetary policy unchanged, but published an accompanying statement that hints that FOMC members continue to edge towards implementing a rate hike”.
“The statement is barely changed from the one released after the June policy decision, but the Fed does sounds a little more enthusiastic on the improvements in the labour market, citing “solid job gains and declining unemployment”. The economy continues to expand “moderately” while inflation is “anticipated to remain near its current low level in the near term” before rising back towards 2% “over the medium term”.
“One very subtle change is in the addition of the word “some” in the sentence “it will be appropriate to raise the target range for the federal funds rate when it has seen some further improvement in the labour market and is reasonably confident that inflation will move back towards its 2% objective over the medium term”. This hints that a couple more decent labour reports, the next of which is next week, would be enough to get a majority voting in favour of tighter monetary policy. A September rate hike remains our call, but it all depends on the numbers – two 200k plus payrolls readings and signs of average hourly earnings edging towards 2.5%YoY might be enough in the absence of negative shocks elsewhere”.
Key Quotes
“The Federal Reserve has left monetary policy unchanged, but published an accompanying statement that hints that FOMC members continue to edge towards implementing a rate hike”.
“The statement is barely changed from the one released after the June policy decision, but the Fed does sounds a little more enthusiastic on the improvements in the labour market, citing “solid job gains and declining unemployment”. The economy continues to expand “moderately” while inflation is “anticipated to remain near its current low level in the near term” before rising back towards 2% “over the medium term”.
“One very subtle change is in the addition of the word “some” in the sentence “it will be appropriate to raise the target range for the federal funds rate when it has seen some further improvement in the labour market and is reasonably confident that inflation will move back towards its 2% objective over the medium term”. This hints that a couple more decent labour reports, the next of which is next week, would be enough to get a majority voting in favour of tighter monetary policy. A September rate hike remains our call, but it all depends on the numbers – two 200k plus payrolls readings and signs of average hourly earnings edging towards 2.5%YoY might be enough in the absence of negative shocks elsewhere”.