3 Apr 2015
Fed rate lift-off likely in Q4 - Rabobank
FXStreet (Barcelona) - Strong employment reports in January and February led the Fed to drop ‘patient’ from its forward guidance and open door for a rate hike, but March jobs data points to a slowdown in jobs growth, notes Philip Marey, Senior US Strategist at Rabobank, while sticking to a Q4 rate hike call.
Key Quotes
“The Committee anticipates that it will be appropriate to hike when it has seen further improvement in the labor market and is ‘reasonably confident’ that inflation will move back to its 2 percent target over the medium term.”
“However, today’s Employment report has shown that employment growth has slowed down in March and that it was not as fast in January and February as the two previous reports had suggested to begin with.”
“So while the FOMC opened the door to a June rate hike last month, we doubt that these data will give the Committee the required ‘reasonable confidence’ to jump at the first opportunity. Weak global growth and the strong dollar are having a more sustained impact on the US economy.”
“Since the exchange rate is directly influenced by monetary policy, its impact on the economy will be a major factor in the Fed’s timing of the first rate hike.”
“The recent appreciation is putting US exporters at a disadvantage. If the Fed moves too fast, a further appreciation of the dollar could undermine the recovery.”
“The fact that the ECB is moving in the opposite direction with its QE is making this side-effect of the Fed’s move to the exit even worse for the US economy. Therefore, for now, we stick to our Q4 call for the first hike.”
Key Quotes
“The Committee anticipates that it will be appropriate to hike when it has seen further improvement in the labor market and is ‘reasonably confident’ that inflation will move back to its 2 percent target over the medium term.”
“However, today’s Employment report has shown that employment growth has slowed down in March and that it was not as fast in January and February as the two previous reports had suggested to begin with.”
“So while the FOMC opened the door to a June rate hike last month, we doubt that these data will give the Committee the required ‘reasonable confidence’ to jump at the first opportunity. Weak global growth and the strong dollar are having a more sustained impact on the US economy.”
“Since the exchange rate is directly influenced by monetary policy, its impact on the economy will be a major factor in the Fed’s timing of the first rate hike.”
“The recent appreciation is putting US exporters at a disadvantage. If the Fed moves too fast, a further appreciation of the dollar could undermine the recovery.”
“The fact that the ECB is moving in the opposite direction with its QE is making this side-effect of the Fed’s move to the exit even worse for the US economy. Therefore, for now, we stick to our Q4 call for the first hike.”