Fed: We Believe FOMC will Wait Until September to Raise Rates - Danske
According to analysts from Danske Bank, the minutes from the latest FOMC
meeting showed a divided committee and they continue to expect the next
rate hike to take place in September.
Key Quotes:
“The minutes from the FOMC meeting held in April revealed that the FOMC
is more divided than we previously thought. In general, the FOMC members
agreed that the labour market continues to strengthen, weak GDP growth
in Q1 was likely a transitory dip and financial conditions have eased.
But the agreement ended there.”
“The minutes state that while 'several FOMC participants' thought that
risks are 'roughly balanced', 'many others' continue to see 'downside
risks'. Also, on inflation the FOMC members disagreed. While 'several
continued to see important downside risks to inflation' from low
inflation expectations, 'many' thought the recent developments 'provided
greater confidence that inflation would rise to 2 percent'. So clearly we have a fight between 'several' and 'many', leaving some confusion on how to interpret the Fed.”
“Interestingly, 'most participants' judged that it would be
'appropriate' to hike in June if 'incoming data were consistent with
economic growth picking up in the second quarter, labor market
conditions continuing to strengthen, and inflation making progress'. On
the surface this could look like a clear intention to hike in June but
then the minutes state that 'several participants were concerned that
the incoming information might not provide sufficiently clear signals to
determine by mid-June whether an increase in the target range for the
federal funds rate would be warranted.'”
“Our main scenario is still that the Fed will wait with hiking until the FOMC meeting in September and only hike once this year among other things due to our judgement that most voting FOMC members are dovish.”
