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23 Jan 2015
Fed might delay its rate hike to Q4 2015 – Rabobank
FXStreet (Barcelona) - The Rabobank Team expects wage deceleration, plunging market inflation expectations and the stronger-than-projected disinflation to lead Fed to delay its hike from mid-2015 to Q4 2015.
Key Quotes
“The inflation data released since the previous FOMC meeting suggest that disinflation is more rapid and severe than anticipated by the Committee. The next update of the FOMC projections is scheduled for March, and a repetition of the phrase ‘The Committee continues to monitor inflation developments closely’ in the FOMC statement should buy them some time, but the Fed’s credibility on the price stability side of its dual mandate is slowly eroding.”
“Meanwhile, we are likely to see a repetition of the ‘patience’ phrase in the forward guidance on the first rate hike and the overdue removal of ‘considerable time’.”
“The combination of stronger-than-projected disinflation, wage deceleration and plunging market inflation expectations is testing the confidence of various FOMC participants. In our view, this will lead to a delay in the first rate hike from mid-2015 to 2015Q4.”
Key Quotes
“The inflation data released since the previous FOMC meeting suggest that disinflation is more rapid and severe than anticipated by the Committee. The next update of the FOMC projections is scheduled for March, and a repetition of the phrase ‘The Committee continues to monitor inflation developments closely’ in the FOMC statement should buy them some time, but the Fed’s credibility on the price stability side of its dual mandate is slowly eroding.”
“Meanwhile, we are likely to see a repetition of the ‘patience’ phrase in the forward guidance on the first rate hike and the overdue removal of ‘considerable time’.”
“The combination of stronger-than-projected disinflation, wage deceleration and plunging market inflation expectations is testing the confidence of various FOMC participants. In our view, this will lead to a delay in the first rate hike from mid-2015 to 2015Q4.”