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9 Feb 2015
Fed lift‐off ‘yo‐yos’ between June and November 15 – RBS
FXStreet (Barcelona) - The RBS Team comments on the sudden shift in Fed rate hike expectations, and further forecasts a 25bp rate hike in Q3 or Q4 2015.
Key Quotes
“A few things to note. (i) Going into Friday’s NFPs, Fed lift‐off was priced out of Oct/Nov. Now it’s back up to Aug/Sep’15.”
“Some FOMC members ‐ both hawks and doves ‐ have hinted that the unemployment rate (UR) could be through NAIRU by Q4’15. And on inflation, the current stance is to look through the transitory energy drag.”
“Ms Yellen intimated that lift‐off could still come if the Committee had reasonable confidence that inflation will be rising towards target within the forecast horizon.”
“So I am Fully With the house forecast that a token 25bp move is on the cards Q3/Q4’15.”
“I also sympathise with the market view that the Fed is unlikely to hike rates when everyone is cutting. But I do not believe they will ignore how close they are to target either. Unless they consciously decide to run a positive output gap; a ‘better to delay hiking rather than being forced to reverse course’ stance.”
Key Quotes
“A few things to note. (i) Going into Friday’s NFPs, Fed lift‐off was priced out of Oct/Nov. Now it’s back up to Aug/Sep’15.”
“Some FOMC members ‐ both hawks and doves ‐ have hinted that the unemployment rate (UR) could be through NAIRU by Q4’15. And on inflation, the current stance is to look through the transitory energy drag.”
“Ms Yellen intimated that lift‐off could still come if the Committee had reasonable confidence that inflation will be rising towards target within the forecast horizon.”
“So I am Fully With the house forecast that a token 25bp move is on the cards Q3/Q4’15.”
“I also sympathise with the market view that the Fed is unlikely to hike rates when everyone is cutting. But I do not believe they will ignore how close they are to target either. Unless they consciously decide to run a positive output gap; a ‘better to delay hiking rather than being forced to reverse course’ stance.”