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21 May 2015
FOMC Minutes: A lot of discussion but very little concluded - Danske
FXStreet (Barcelona) - Signe Roed-Frederiksen, Senior Analyst at Danske Bank, reviews the key points from the FOMC Minutes, and further forecasts September to be the likely timing for a rate hike.
Key Quotes
“The minutes from the April FOMC meeting show that the committee is having discussions on several important topics currently and that firm conclusions have so far not been reached. These include details in policy normalisation, the extent of transitory effects driving weakness in Q1 growth, communication ahead of the first rate hike, market reaction to lift-off and the level of the natural real Fed funds rate.”
“Also, once lift-off is done, the minutes indicate that the FOMC will be very sensitive to financial market reaction. If we see a new ‘taper tantrum’ spike in rates, this will likely slow the pace of future rate hikes.”
“The Committee discussed to what extent the weakness in Q1 growth was transitory. A number of reasons were advanced for believing that the weakness in spending observed during the first quarter was partly or even largely transitory. But Various reasons were also advanced for believing that some of the recent weakness in the pace of economic activity might persist.”
“In conclusion however, only a few indicated that downside risks to the economic outlook had risen since the March meeting, while most participants continued to see the risks to the outlook for economic growth and the labor market as nearly balanced.”
“A few members expected that it would be appropriate to raise the Fed funds rate in June but many participants thought it unlikely that the data available in June would provide sufficient confirmation that the conditions for raising the target range for the federal funds rate had been satisfied. We continue to expect a first rate hike in September this year.”
Key Quotes
“The minutes from the April FOMC meeting show that the committee is having discussions on several important topics currently and that firm conclusions have so far not been reached. These include details in policy normalisation, the extent of transitory effects driving weakness in Q1 growth, communication ahead of the first rate hike, market reaction to lift-off and the level of the natural real Fed funds rate.”
“Also, once lift-off is done, the minutes indicate that the FOMC will be very sensitive to financial market reaction. If we see a new ‘taper tantrum’ spike in rates, this will likely slow the pace of future rate hikes.”
“The Committee discussed to what extent the weakness in Q1 growth was transitory. A number of reasons were advanced for believing that the weakness in spending observed during the first quarter was partly or even largely transitory. But Various reasons were also advanced for believing that some of the recent weakness in the pace of economic activity might persist.”
“In conclusion however, only a few indicated that downside risks to the economic outlook had risen since the March meeting, while most participants continued to see the risks to the outlook for economic growth and the labor market as nearly balanced.”
“A few members expected that it would be appropriate to raise the Fed funds rate in June but many participants thought it unlikely that the data available in June would provide sufficient confirmation that the conditions for raising the target range for the federal funds rate had been satisfied. We continue to expect a first rate hike in September this year.”