10 Jul 2014
No clues about first rate hike timing in FOMC minutes - ING
FXStreet (Łódź) - Rob Carnell from ING points out that there was lots of technical discussion about the Fed's normalization process in the minutes from the last monetary policy meeting, but no clues were given about the timing.
Key quotes
"The latest set of FOMC minutes was a bit different to the normal batch, starting with an extended discussion of the Fed's normalisation process - though the minutes went to great pains to stress that this did not imply such a policy shift was imminent."
"The minutes also discussed the timing of the end of re-investment of maturing assets, concluding that there was not much to choose between ending this before, at or after the process of rate increases had begun."
"In the end, it sounds as if this would not front run rate increases, but more likely coincide, or slightly lag that process (gradual, and lagging would be our guess - the Fed after all wants to be cautious in coming out of this unprecedented policy experiment)."
"It also sounds as if the fed will publish its intentions on these issues later this year, to give them time to bed in with markets before they actually occur."
"There was also a further discussion on the ending of QE, which puts to rest the question of whether the Fed's $10bn per meeting taper would finish with a $15bn reduction in QE in October, or leave a final $5bn taper for December. The minutes state a clear preference for the $15bn October option."
"Finally, there was nothing in the text to provide any insight into the timing of the first Fed rate hike - not surprising since the Fed will want to see how 2H 14 GDP growth pans out before committing itself to a course of action."
"But on the basis of the Fed's and our own forecasts, we still see scope for a first increase to 25bp in Fed funds at the April 2015 meeting."
Key quotes
"The latest set of FOMC minutes was a bit different to the normal batch, starting with an extended discussion of the Fed's normalisation process - though the minutes went to great pains to stress that this did not imply such a policy shift was imminent."
"The minutes also discussed the timing of the end of re-investment of maturing assets, concluding that there was not much to choose between ending this before, at or after the process of rate increases had begun."
"In the end, it sounds as if this would not front run rate increases, but more likely coincide, or slightly lag that process (gradual, and lagging would be our guess - the Fed after all wants to be cautious in coming out of this unprecedented policy experiment)."
"It also sounds as if the fed will publish its intentions on these issues later this year, to give them time to bed in with markets before they actually occur."
"There was also a further discussion on the ending of QE, which puts to rest the question of whether the Fed's $10bn per meeting taper would finish with a $15bn reduction in QE in October, or leave a final $5bn taper for December. The minutes state a clear preference for the $15bn October option."
"Finally, there was nothing in the text to provide any insight into the timing of the first Fed rate hike - not surprising since the Fed will want to see how 2H 14 GDP growth pans out before committing itself to a course of action."
"But on the basis of the Fed's and our own forecasts, we still see scope for a first increase to 25bp in Fed funds at the April 2015 meeting."