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17 Mar 2015
Obstacles for a Fed’s rate hike – BBH
FXStreet (Edinburgh) - In the opinion of analysts at BBH, there are some arguments that plot against higher interest rates in the US economy.
Key Quotes
“There are three main arguments against a Fed hike: 1) low inflation, 2) an appreciating dollar, and 3) the fact that most of the rest of the world is easing policy”.
“Contemporaneous core inflation is indeed low. However, there are a few mitigating factors. The decline in energy prices is spilling over into the core measure.This will drop out of the base effect later this year”.
“Fed policy has to be forward looking, and this is only made more difficult by the unpredictable lag and lead times. In addition, if pressed hard enough, most economists, including those conducting monetary policy, embrace some version of the Philips Curve which essentially argues that a tight labor market will boost inflation over time”.
“The dollar is appreciating and at a faster rate than nearly everyone expected. Part of the rise can be explained by the relative strength of the US economy. Part of the rise can be accounted for by the anticipation of the Fed raising interest rates”.
Key Quotes
“There are three main arguments against a Fed hike: 1) low inflation, 2) an appreciating dollar, and 3) the fact that most of the rest of the world is easing policy”.
“Contemporaneous core inflation is indeed low. However, there are a few mitigating factors. The decline in energy prices is spilling over into the core measure.This will drop out of the base effect later this year”.
“Fed policy has to be forward looking, and this is only made more difficult by the unpredictable lag and lead times. In addition, if pressed hard enough, most economists, including those conducting monetary policy, embrace some version of the Philips Curve which essentially argues that a tight labor market will boost inflation over time”.
“The dollar is appreciating and at a faster rate than nearly everyone expected. Part of the rise can be explained by the relative strength of the US economy. Part of the rise can be accounted for by the anticipation of the Fed raising interest rates”.