Fed: Course ahead is not that clear - Commerzbank

Research Team at Commerzbank, suggests that the Fed will not increase interest rates this week but after the toing and froing in recent communications, the course ahead is not that clear.

Key Quotes

“Firstly, we should not read too much into the FOMC statement. Secondly, public remarks by most regional Fed presidents can be safely ignored, the decisive figures are the board members. Third, it all depends on the data and fourth, the Fed only raises interest rates when markets are calm. We still expect a rate hike towards the end of the year.

Interest rate hike should still come in 2016

Based on the real economic data, the Fed should still tend towards rate hikes. Possible dates for a rate rise are September and December, as press conferences will then be held. The slow increase in inflation pressure will allow the Fed to be unhurried. As the outlook up to mid- September will presumably not be clear enough by then, the next rate hike is more likely to happen in December in our opinion, followed by two further steps in the coming year. This would still be much more than the market currently expects. Consequently, we predict a somewhat stronger dollar and slightly higher yields in the medium term.”