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2 Dec 2014
Fed rhetoric unchanged for now – BTMU
FXStreet (Barcelona) - Derek Halpenny, European Head of Global Market Research at Bank of Tokyo-Mitsubishi UFJ, takes a cautious approach on the dollar into the year-end as he views that the fall in crude oil price might illicit the biggest shift in expectations on monetary policy from the Fed.
Key Quotes
“With the ECB and BOJ already easing, or hinting at further easing, and the BOE communication already changed, a shift in communication from the Fed would be the biggest relative change.”
“But judging from the comments from Fed Vice Chairman Fischer and New York Fed President Dudley, our concerns may be unwarranted. Both focused on the benefit to growth rather than on the potential for the inflation goal to be missed on the downside. Fischer stated that the inflation dynamic would be temporary.”
“Dudley was a little more focused on the inflation factor stating that the risks of tightening too soon when at the zero bound was much greater than tightening too late. Still, he emphasised the positive lift to real incomes and repeated that the mid-2015 lift-off for the federal funds rate remained reasonable.”
“So no real hints here of the potential for a delay in the mid-year timing for the first federal funds rate increase although we need to see what happens in the oil market ahead of the FOMC meeting on 17th December. There is still a risk of a shift in rhetoric in regard to the policy outlook and with the FOMC President voting changes leaving the committee more dovish next year, any change in message could trigger a notable market response.”
Key Quotes
“With the ECB and BOJ already easing, or hinting at further easing, and the BOE communication already changed, a shift in communication from the Fed would be the biggest relative change.”
“But judging from the comments from Fed Vice Chairman Fischer and New York Fed President Dudley, our concerns may be unwarranted. Both focused on the benefit to growth rather than on the potential for the inflation goal to be missed on the downside. Fischer stated that the inflation dynamic would be temporary.”
“Dudley was a little more focused on the inflation factor stating that the risks of tightening too soon when at the zero bound was much greater than tightening too late. Still, he emphasised the positive lift to real incomes and repeated that the mid-2015 lift-off for the federal funds rate remained reasonable.”
“So no real hints here of the potential for a delay in the mid-year timing for the first federal funds rate increase although we need to see what happens in the oil market ahead of the FOMC meeting on 17th December. There is still a risk of a shift in rhetoric in regard to the policy outlook and with the FOMC President voting changes leaving the committee more dovish next year, any change in message could trigger a notable market response.”