What To Expect From FOMC Minutes? Market predictions and reactions - page 9
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Don't panic about inflation says ECB's Liikanen - Livesquawk
Erkki Liikanen in the German press via Reuters and Bloomberg
Preview: FOMC Minutes - Barclays
The following is Barclays Capital's preview for the FOMC minutes from the September meeting:
"Since the September FOMC meeting, a number of FOMC participants have declared that the decision not to raise rates was “close”. We look to the minutes to provide some insight into this statement.
We also look to the minutes for context on the new sentence inserted into the September statement acknowledging risks from “global economic and financial developments.”
The minutes are likely to reveal the balance of sentiment between those members who preferred to look through these risks and those members who pushed to postpone any rate hike in an abundance of caution," Barclays projects.
"In addition, the minutes should reveal the number of members who are focused on economic activity abroad rather than just the financial market spillovers to the US.
Keeping in mind that our call for March lift-off rests on both our forecast path of inflation and the FOMC’s growing concern about low US inflation, we will be attentive to members’ views on the prospects for inflation normalization in the external environment," Barclays adds.
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USD Into FOMC Minutes - Credit Agricole
Today’s focus is on the September FOMC minutes. They should shed light on the Fed’s thinking in regards to domestic and international risks.
We expect to read that the committee decided to delay firming policy due largely to global financial turbulence – notably China. The minutes are likely to show the tighter financial market conditions that resulted from the EM shocks (stronger dollar, wider credit spreads and equity market declines) was key in driving the Fed’s decision to remain on hold. These shocks, in turn, could hamper the Fed’s ability to hit its medium-term inflation target.
But the minutes are also likely to show that the Fed’s upbeat view of the labour market persists. In this regard, we think the Fed will emphasise the strength of the labour market, which continues to remain their favoured forecasting tool for inflation.
In the end, we doubt the minutes will sound an all clear on a December rate hike.
Even so, it is likely the minutes will show the Fed was much closer to a rate hike than many believe, helping to stabilize the recent sell-off in the greenback.
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What To Expect From FOMC Minutes? - Views From 15 Major Banks
The following are the expectations for today's FOMC minutes from the September meeting as provided by the economists at 15 major banks along with some thoughts on the USD into the event as provided by the FX strategists at these banks.
Goldman Sachs: The Fed will release the minutes from its September 17 meeting today. We will be looking for any indications regarding the timing of the Fed 'lift-off'. Our economists have noted that FOMC guidance about the appropriate lift-off point now seems more unified than earlier in the year. Since the meeting, Chair Yellen and Presidents Dudley, Rosengren and Williams have all reiterated that they expect a rate hike before year-end.
BofA Merrill: The minutes of the September FOMC meeting are likely to be scoured for clues about how close the non-hike decision was and what the Committee needs to see in order to hike later this year. Relative to market expectations, which interpreted the statement as very dovish and are not pricing a rate hike until well into 2016, the minutes could appear somewhat hawkish.Several recent Fed speakers have emphasized that the September meeting was a very “close call,” and that conditions for liftoff are likely to be satisfied soon. Market participants will be looking for signs of how strongly held this view actually is, and what conditions – particularly on the global front – might derail that expectation. Our base case is that the Fed begins a very gradual normalization process with liftoff at the December meeting. In a nutshell, the debate in the minutes is likely to boil down to the continuing strength of the labor market recovery versus continued low inflation and risks to the outlook originating from abroad. If the Committee sounds fairly convinced that there has been sufficient improvement in the labor market to start normalization – perhaps some residual slack notwithstanding – then that would be a hawkish message for the markets. We expect a divided Committee on the issue of “hidden slack,” the cyclical nature of the low participation rate, and the signal to take from low wages.
Barclays: Since the September FOMC meeting, a number of FOMC participants have declared that the decision not to raise rates was “close”. We look to the minutes to provide some insight into this statement. We also look to the minutes for context on the new sentence inserted into the September statement acknowledging risks from “global economic and financial developments.” The minutes are likely to reveal the balance of sentiment between those members who preferred to look through these risks and those members who pushed to postpone any rate hike in an abundance of caution," Barclays projects. "In addition, the minutes should reveal the number of members who are focused on economic activity abroad rather than just the financial market spillovers to the US. Keeping in mind that our call for March lift-off rests on both our forecast path of inflation and the FOMC’s growing concern about low US inflation, we will be attentive to members’ views on the prospects for inflation normalization in the external environment.
RBS: The clear concern expressed by the Chair at her post-decision press conference about international developments, and the decision to add new phrases about these international developments to the FOMC statement, likely means that a discussion of EM softness, the stronger USD, and potential spillovers to the US featured prominently in the minutes. Still, Chair Yellen said that the committee discussed hiking the policy rate during the September meeting, and an indepth discussion of the debate over whether to begin rate hikes will certainly be notable. The nuance of this discussion may drive the USD reaction – a sense that most members were united in the view to leave rates on hold in September may provide a sense of calm that rates are likely to remain low, but a strong debate over the merits of a move in September may give the sense that the Fed was much closer to hiking the policy rate than the commentary or forecasts implied. Of course, these minutes pertain to a meeting that took place before the disappointing September NFP report. On procedural measures, any mention of adding a press conference to the October meeting could be taken as hawkish.
BNPP: We expect today’s minutes of the September FOMC meeting to contain plenty of indications that most Committee members expected to be hiking rates by December. However, the information is likely to be viewed as stale as it pre-dates the September jobs numbers
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Fed's Williams repeats that Fed liftoff warranted later this year
Comments from San Francisco Fed President Williams:
He will take questions from the audience and speak to the media afterwards so there may be some market-moving comments later.
Fed's Lockhart: We're waiting for the market to tell us what to do
Lockhart answering audience questionsWhat he actually said was "market volatility to play a role in rate-hike decision" but the Fed playbook is never to upset the equity market.
Earlier Lockhart highlighted consumer data as a key metric on whether the Fed will hike. The US retail sales report is due next Tuesday and is certainly the highlight next week.
Other comments from Lockhart:
Watching European experiments with negative rates, though 'not very plausible' in US
Fed's Fischer: We need to be confident that inflation will return to 2%
Comments from Federal Reserve vice-chairman Stanley Fischer on CNN:
I would have loved for there to have been some market-rocking comment with 50 minutes left in forex trading for the week but there isn't much there.
If anything, the comments are balanced but a touch hawkish. Noting that most FOMC members still expect to hike this year is the Fed reiterating that December is still on the table.
NY Federal Reserve chief: Rate hike likely this year but hinges on data
The head of the Federal Reserve Bank of New York said Friday that a Fed rate hike remains likely this year but that a final decision will depend on how the economy performs.
In an interview with CNBC, William Dudley said he expects solid U.S. economic growth to offset weakness overseas, which is hurting U.S. exports. But he said the economy will need to further improve for the Fed to raise rates from record lows.
”There’s certainly a risk that the economy evolves in a different way than I expect, and obviously (it would) be totally inappropriate for me to not take that into consideration in terms of what I think is appropriate for monetary policy,” Dudley said.
The Fed’s final two meetings of 2015 will occur later this month and in December. Though Dudley said a rate hike could theoretically occur at any meeting, his comments seemed to favor December.
Dudley said that while a decision to raise rates at the Oct. 27-28 meeting was ”possible,” he added: ”Have we seen enough information between September and October to convince us to do in October what we didn’t do in September? That would be the question I would ask.”
Some economists still think the Fed will delay a hike until 2016 because of pressures from overseas and excessively low inflation.
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On one side they keep talking about rate hike on the other about negative rates. So what is the official lie this week?
On one side they keep talking about rate hike on the other about negative rates. So what is the official lie this week?
The official statement for this week : "We have no idea what are we doing"