Why does the Fed continue to be a glutton for punishment, repeatedly announcing for over a year that it is going to raise interest rates, then having to put the decision on hold? Yet again it has announced it will have to hike rates before end-year, possibly twice, and perhaps, once more, it will have to back down.
James Alexander via Historinhas | As the FOMC increasingly avers that it is data-driven the demand to have better data has led to greater focus on aggregated current data. Whether the FOMC really looks at it, given it is ignoring its own Labour Market Conditions Index, is hard to say.
BARCLAYS | In our view, achieving the FOMC’s target of 2% PCE inflation may require a substantial undershoot on the unemployment rate ( to 4% if not below ). Should the unemployment rate remain near current levels or should inflation expectations drift lower, the FOMC would be unlikely to hit its inflation target over the foreseeable future.
LONDON | Barclays | The US dollar strengthened after the FOMC left the door open for a September move, although it did not provide any strong signal for the timing of the first hike.
The Corner| April 9, 2015 | Strong figures from German industry will offer further encouragement to EU policymakers that the economic recovery is now on the right track. German industrial production grew by 0.2%, beating expectations of a 0.1% rise. The increase in industry excluding energy and construction was 0.5% according to latest data from the Bundesbank.
The Corner | March 16, 2015 | The week ahead is likely to be dominated by the FOMC meeting in the US. Market watchers are expecting some movement on the semantics of pronouncements by the US Fed. In essence, any change in language will signal that a rates hike from the central bank is drawing closer.
WASHINGTON | Comment by UBS analysts | The FOMC ended QE and made its Fed funds rate hike guidance a bit more data- dependent. While the funds rate is likely to remain in its current range “for a considerable time” after asset purchases end at the end of this month, rate hikes could occur sooner or later than the Fed currently anticipates depending on the evolution of economic data. This was as straightforward an FOMC statement as could have been expected at the end of QE. It does not suggest changes in Fed thinking; nor does it change our expectations for the first Fed fund rate hike in mid-2015.
MADRID | The Corner | As expected, the Fed confirmed the end of its QE3, although the announcement was slightly more restrictive. According to experts at Link Securitites, “while the decision shows that US economic conditions have improved (especially the labour market) and inflation remains at low levels, the message tone was more hawkish.”
MADRID | The Corner | Investors experienced the ECB’s stress tests hangover and were quite dovish throughout the Monday’s session. Apparently Tuesday won’t be any different and they will remain prudent until Wednesday, when the FOMC releases its conclusions. Markets expect the Fed to finish tapering, as well as an interest rates hike, experts at Link commented.