What To Expect From FOMC Minutes? Market predictions and reactions - page 4
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Hilarious :
That will be the day : when FED admits it is cheating (all the time)
FED already started to talk down the rate hike. This will be once again a "Yellen hike" - all talk no change
FED already started to talk down the rate hike. This will be once again a "Yellen hike" - all talk no change
FED is getting ready for a new QE. there will be no rate hike
FOMC preview: Two things to watch from the Fed
The Federal Reserve decision is due July 29 at 1800 GMT (2 pm ET)
The July FOMC isn't seen as a 'live' meeting, in the sense that they could hike rates but the market is torn about whether or not the Fed will hike in September.
The OIS market is pricing about a 40% chance of a Fed hike in September while about 80% of economists are forecasting liftoff. July Fed communication could help wipe out that gap.
The current FOMC doesn't like to pre-commit and wants to keep markets guessing so it's highly unlikely there will be any clear signal so market moves will be based on reading between the lines..
One of the problems for the Fed is low inflation. Overall CPI was up just 0.1% year-over-year in June and core CPI was at 1.8% (and below 2% for three years).
The Fed believes some inflation is coming but raising rates is more about getting away from 'emergency' monetary policy and towards something normal.
Does the Fed even need to change the statement?
There is nothing in the June statement that commits the Fed to holding. They saw the economy expanding modestly with moderate household spending and soft business investment. Nothing has changed there.
Economists at Credit Agricole said the Fed may only make cosmetic changes to the communication.
"The July FOMC statement is not expected to be significantly different from the statement
following the June meeting. The first paragraph may see some tinkering around the edges to
reflect the most recent economic data. However, the balance of the statement should see little change," they write today.
Two things to watch:
1) The balance of risks
"The Committee continues to see the risks to the outlook for economic activity and the labor market as nearly balanced."
If the Fed wants to tip a more hawkish bias but not necessarily commit to a September hike, they could emphasize a slight tilt here.
2) Voting
The hawk brigade at the Fed is led by the two female regional presidents -- Mester and George. Both have indicated that they're ready to hike now.
How ready?
A dissent towards hiking rates may be the kind of minor signal
source
FT asks if the FOMC will "formally signal a looming move" this week
A weekend piece in the Financial Times says a "key question is whether the Fed will feel any compulsion to formally signal a looming move in this week's statement".The Federal Reserve's Federal Open Market Committee meet Tuesday and Wednesday this week
The FT goes on:
And ...
Judging from the last Yellen congressional hearing, nothing will change. She is far more preoccupied with hiding the thing under the rug then with rate hike
FOMC Preview: Noncommittal; No Clear Signal - BofA Merrill
Bank of America Merrill Lynch doesn't expect any explicit changes to the July FOMC policy language to signal something about the timing of liftoff.
"Rather, markets will have to infer the Fed’s plans from the assessment of the recent data and the outlook in the July postmeeting statement. In accordance with a data-dependent approach, this should be the main way the Fed will communicate the chances for liftoff at upcoming meetings," BofA adds.
"With the data somewhat more mixed since June, we expect a cautiously optimistic if noncommittal message. This may be slightly more hawkish than current market expectations (which place the probability of a September hike in the vicinity of 40%), but not a strong enough signal to trigger a major repricing in our view," BofA projects.
source
Markets await the FOMC decision
We enter the last trading week of the month with a 2 day FOMC meeting to contend with. It’s unlikely that the Fed will strengthen its language so as to signal a September hike, but naturally the markets will scrutinise the statement for any signs that the Fed is shifting in that direction. The dollar performance has been mixed Friday and during the overnight session, weakening against the single currency, yen and Canadian dollar, whilst strengthening against most emerging market currencies. Once again, the lottery that is the Chinese stock market has slumped overnight, down by around 7%. Whilst the correlation between this, the Chinese economy and other stocks markets is tenuous at best, the continued volatility is not helping risk sentiment in both currencies and commodities.
The distractions for today include the German IFO business sentiment data at 08:00 GMT, together with money supply and lending data for the Eurozone at the same time. US durable goods data is seen this afternoon. On the charts, the USDCAD continues to look interesting on the move above the 1.30 level, which was sustained on a closing basis on Friday. GBPJPY also looks interesting, having fallen for 6 of the past seven sessions. The Aussie is also at new lows for the year against the US dollar, with the China backdrop not helping matters and the break below the 0.73 level seen on Friday having largely been sustained today.
source
July FOMC: The Less, The Better For the USD - RBS
RBS sees little scope for broad changes in the FOMC language this week and expects the Fed Funds rate to be held steady.
"We think the language in the statement will likely match the tone Chair Yellen took at her Semi-Annual Congressional Testimony and those included in the June FOMC statement," RBS adds.
"A statement that offers few, or no, changes may be a modest USD positive, as the market is pricing in just a 34% chance of a rate hike at the September meeting," RBS argues.
"A bearish EUR/USD can’t really be predicated on a hawkish Fed story as the Fed seems almost certain to play any tightening very cautiously. Still, we do still have a September first rate rise view which is not priced into markets and which could give the USD a boost if manifest," RBS projects,
source
Fed Could Go for Double Rate Hike In 2015
As the US central bank is bracing for the first interest-rate hike, some market watchers say two hikes in rates could become a reality in the months ahead.
"Yellen has always said that when wages go up between 4 and 5 percent that's when we raise rates," Paul Donovan, global economist at UBS investment bank said.
"This is going to be a very gentle, gradual trajectory, but I think they hike in September and I think they hike in December, I expect two hikes this year. Remember inflation really is picking up in the U.S. in a reasonably notable way, it is going to be coming in comfortably over 2 percent at the start of next year," he added.
The Fed policymakers will hold a monetary policy meeting on Tuesday and Wednesday. In the minutes from the June meeting the Fed officials said:
"In considering the Committee’s criteria for beginning policy normalization, all members but one indicated that they would need to see more evidence that economic growth was sufficiently strong and labor market conditions had firmed enough to return inflation to the Committee’s longer-run objective over the medium term."
As for economic growth, the Atlanta branch of the Federal Reserve published its GDPNow forecast, in which it says growth in the second quarter is now expected to hit 2.4%.
The labor market is improving as well, with data pointing to steady underlying trends, while the remaining slack is diminishing. The most recent confirmation of a positive trend was the Initial Jobless Claims report from last week that showed the weekly number of Americans asking for unemployment benefits for the first time fell to 255,000, the lowest since November 1973.
As the first monetary policy tightening is moving closer, the US currency remains bullish against most of its major peers. Analysts say the rate hike in September will have a positive impact on the greenback.
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