Fed's rate rises to be more rapid than expected - Capital Economics

FXStreet (Bali) - Kevin Ferriter, Economist at Capital Economics, notes that regardless of the timing of the Fed lift-off, the pace of rate increase will be more rapidly than market expects.

Key Quotes

The minutes of the March FOMC meeting, released on Wednesday, show a split between Fed officials on whether to begin hiking the fed funds rate in June or to wait until later in the year."

"This and the recent data, particularly March’s poor payrolls numbers, have made us less confident that lift-off will take place in June. We now think it is equally likely to happen in September."

"Regardless of the timing of the first hike, we expect rate rises to be more rapid over the next couple of years than either policymakers or market participants generally expect."

"This should lead to a moderate rise in the yield of US Treasuries by pushing up investors’ expectations of the average short-term interest rate during the bond’s lifetime (i.e. the risk-neutral yield)."