Lee Hardman, Currency Analyst at Bank of Tokyo-Mitsubishi UFJ, notes that the recent comments from Fed member’s has reinforced the expectations for a mid-year rate hike by the Fed.
Key Quotes
“The US dollar has continued to trade on a firmer footing in the Asian trading session following hawkish comments from voting FOMC members overnight.”
“San Francisco Fed President Williams has stated that the time for the Fed to begin raising rates is getting “closer and closer” amid faster than expected wage rises in January and “really strong” hiring. He downplayed potential concerns regarding raising rates while other central banks are easing policy which he doesn’t see as “an argument against doing what is the appropriate thing” for the US economy.”
“He emphasized that by raising rates earlier when inflation is still low it can allow for a more gradual pace of tightening rather than running the risk of having to raise rates “more dramatically” if the Fed got behind the curve on inflation.”
“He did not go as far as committing to a rate hike as early at the June FOMC meeting stating only that the decision to hike or delay a bit longer would be “in play” at that point.”
“Richmond Fed President Lacker displayed an even more hawkish tone stating overnight that “at this point, raising rates in June looks like an attractive option for me” Only surprising economic data between now and then could change his mind with the economy “clearly growing at a more rapid, sustained pace than it was a year ago”.”
“The comments are consistent with our view that the Fed will soon signal more clearly that it will begin to raise from the middle of this year.”
Key Quotes
“The US dollar has continued to trade on a firmer footing in the Asian trading session following hawkish comments from voting FOMC members overnight.”
“San Francisco Fed President Williams has stated that the time for the Fed to begin raising rates is getting “closer and closer” amid faster than expected wage rises in January and “really strong” hiring. He downplayed potential concerns regarding raising rates while other central banks are easing policy which he doesn’t see as “an argument against doing what is the appropriate thing” for the US economy.”
“He emphasized that by raising rates earlier when inflation is still low it can allow for a more gradual pace of tightening rather than running the risk of having to raise rates “more dramatically” if the Fed got behind the curve on inflation.”
“He did not go as far as committing to a rate hike as early at the June FOMC meeting stating only that the decision to hike or delay a bit longer would be “in play” at that point.”
“Richmond Fed President Lacker displayed an even more hawkish tone stating overnight that “at this point, raising rates in June looks like an attractive option for me” Only surprising economic data between now and then could change his mind with the economy “clearly growing at a more rapid, sustained pace than it was a year ago”.”
“The comments are consistent with our view that the Fed will soon signal more clearly that it will begin to raise from the middle of this year.”
