So, Don't Expect The Fed To Rush Rate Hikes - page 3
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U.S. factory orders fall 1.0% in September U.S. factory orders fell for the second consecutive month in September, dampening optimism over the health of the economy, official data showed on Tuesday.
In a report, the U.S. Census Bureau said factory orders dropped by a seasonally adjusted 1.0% in September, worse than forecasts for a fall of 0.9%.
Factory orders decreased 2.1% in August, whose figure was revised from a previously reported decline of 1.7%.
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Fed's Williams: Will "wait and see on" on data between now and December FOMC San Francisco Federal Reserve Bank President John Williams spoke in Arizona over the weekend. Probably to Greg, but I'll have to check that. Asked about a his view on a December rate hike, he said he expects "a lot of data" between now and then & "I am going to wait and see"
More:
Reuters and Bloomberg both have more, and both ungated.
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"Wait and see" makes sense. If someone in China breaks wind between now and December that'll likely be enough to send the Fed ducking for cover and postponing a hike.
source
Fed's biggest dove flying the nest Jan 1st Minneapolis Fed's Narayana Kocherlakota's replacement named Former Pimco executive Neel Kashikari named his replacement
Kocherlakota has been the only Fed member to adamantly not want rate hikes, in fact he was still pumping for negative rates back in October
What nest the nooby flies into is uncertain but he's from Vampire Squid stock as well as Pimco
He also ran George W Bush's $700bn TARP to pump up the banks in 2008
Whether he's dovish or hawkish could obviously come too late if the Fed go in Dec, and his bank is only on the FOMC subs bench next year anyway
Fed's Evans Still Unsure About Rate Hike Charles Evans, who is also a Federal Open Market Committee (FOMC) voting member, said that he looks forward to the time when the economy is strong enough to handle a Federal Reserve (Fed) rate hike without a heavy burden.
Evans warned at the University of Chicago Booth School of Business that the Fed should not consider raising rates if it will just have to lower them again shortly afterward.
"I think it's extraordinarily costly to contemplate a high probability that we're going to revisit the zero lower bound, after a period where we've gotten ourselves out of this, over the next 10 years," one of the Fed's most dovish policymakers said.
Evans also said that he saw little merit in the arguments about closer cooperation between the Fed and fiscal authorities to make a stronger economy, adding that in his view monetary policy independence is crucial to effective policymaking.
"Our current system has served us well in my opinion, so the bar should be high for making major changes and risking independent decision making," Evans concluded.
Evans reacted to the proposal of some experts, who say that more coordination could result in a stronger economy, especially when the Fed's hands are tied on policy actions due to low interest rates.
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USD: 5 FOMC Members To Speak Today; What To Expect? - BNPP The US calendar heats up today with five FOMC members due to speak.
"Fed Chair Yellen delivers brief opening remarks at a conference, but a speech by New York Fed President Dudley on the US economic outlook to the Economic Club of New York may provide more fodder," notes BNP Paribas.
"Markets will be looking for confirmation that Dudley is on board for a December rate hike, but with this increasingly well priced-in, focus is likely to shift to what the pace of tightening beyond December might look like," BNPP adds.
"The USD could be vulnerable if Dudley were to emphasize that USD strength might be a factor restraining tightening over the course of 2016. The Fed’s broad TWI gained more than 1% last week and is now nearly back at levels prevailing at the Fed’s September policy meeting when the Fed sounded very cautious about international headwinds,"BNPP argues.
Between the lines Fed's Mester strongly hints at supporting Dec hike
The full text of Mester's speech includes this line:
"I expect inflation to remain low in the near term, but the firming in the core measures, the stability in inflation expectations, the economy's expected return to above-trend growth, and continued improvement in labor markets are all factors making me reasonably confidentthat inflation will gradually return to our 2 percent goal over the medium run."
The words reasonably confident aren't a coincidence. This is the key line in the FOMC statement.
"The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen some further improvement in the labor market and isreasonably confident that inflation will move back to its 2 percent objective over the medium term."
There is little doubt on the jobs front any longer so it's all about inflation and if Mester is already reasonably confident, then she's decided to vote for a hike.
On top of that, Mester said the time to demonstrate a way out of emergency mon pol "is quickly approaching."
She leans toward the hawkish side so none of it is a big surprise. Mester doesn't have a vote this year but she will in 2016, along with Bullard and George, who are also hawks.
Overall, this speech is quite a bit more hawkish than the headlines on the newswires.
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Stable US Inflation in October Gives Fed the Go Ahead US inflation rates appear to have stabilized in recent months from the disinflationary shock of last year, which eliminates another obstacle for policymakers at the Federal Reserve who are hoping to be raising rates this time next month.
The consumer price index rebounded 0.2% in October, on par with forecast, and following an unrevised 0.2% drop in September, fresh figures from the Department of Labor showed on Tuesday.
The gains in the all-items CPI were led higher by energy prices, spread between a 0.4% rebound in gasoline costs after two months of sharp declines and a 0.4% increase in electricity. Food prices increased slightly as well.
Even with the October price hike, the first gain in three months, the trend in inflation pressures has been all but non-existent. Prices rose a scant 0.2% over the past 12 months, data revealed on Tuesday. That is a notch higher than the 0.1% markets had been expecting.
The trend in inflation so far this year - a couple of tenths of a percentage point above zero at most - has been a key obstacle to Fed officials' plans to start lifting interest rates from zero where they have been for the past seven years. Before they can do that, though, they first need to gather confidence that the trend in inflation will gradually accelerate to 2% over the next couple of years.
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Jury out on the day ahead as FOMC Minutes cast their shadow It's quiet out there right now as attention switches between Paris and the FOMC Minutes
The latest on the shootings in the Paris suburb of St Denis is that there is on-going sporadic gunfire despite reports that it had finished a short while ago, with talk of 1-2 suspects dead
Market wise traders are understandably cautious not only with those events but the revelations that the FOMC Minutes, due at 19.00 GMT, may produce
It's going to be a long wait and right now we're at a standstill with EURUSD stuck just below 1.0650, GBPUSD flicking around 1.5200, USDJPY still on its lows at 123.25 after the Nikkei closed softer with AUDUSD and USDCAD stuck around 0.7100 and 1.3310 respectively
We must always expect the unexpected but it's difficult to see where/why we are going to get much by way of volatility in broader ranges until we know more from the Fed later
Green light for December rate hike? The big news hanging over markets remains the release of yesterday Fed minutes from last month’s policy statement. As is usually the case with Federal Open Market Committee, its members were very non-committal in the minutes but did say that unless things changed drastically between now and the December meeting, there is a chance that rates could very well move higher, they think. It would appear the Fed though is preparing everyone for a normalization period, which could be low… and slow… Markets in North America jumped higher on the “clarity” and the optimism spread overnight, as indices in Europe and Asia were a sea of green. The US dollar was sold off a touch as it did little to reinvigorate the foreign exchange bulls, who admittedly had little upside.
There was very little economic data to speak of overnight, despite Japan’s latest policy meeting. News this week that Japan’s economy slumped into recession did not dissuade policy makers, who voted 8-1 to keep policy unchanged. There is some growing chatter in European circles that “QE2” is gaining traction within the ECB, but the euro is rising none the less. Tomorrow, ECB Chairman Mario Draghi will address markets but is unlikely to upset the apple cart. The commodity conundrum, which we spoke of yesterday, continues to envelope markets as oil prices crashed below the important $40 mark. For the moment, the reaction has been muted in FX circles, as so-called commodity currencies (AUD, CAD, NOK) have not been hit too hard.
Concerning the FOMC minutes released yesterday, there were not many surprises. Policy members did change the wording of their statement a bit to specifically reference a December hike but there was no suggestion it is a done deal. Although the Fed members claim not to be politicians, they sure had markets fooled. While they did express concern over the slower pace of employment growth in August and September, those seem to have been erased by the October jump as a well as the positive signals in inflation date over the last few months. The key aspect of the minutes was the specific reference to a December hike, but regardless of this fact, the dollar was sold off a bit as most other currencies were largely unaffected.
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