This Is the Fed's Hawk-to-Dove Scorecard
The Fed & The Dollar's Dilemma - CIBC The Fed hiked, but it wasn’t quite the “dovish hike” that investors were looking for, notes CIBC World Markets.
"With no dissents and no change to the dot plot forecast for the end of 2016, the US$ was given a boost as markets were forced to reassess how many hikes could come in the future. But in contrast to last year, consensus expectations for further greenback strength in 2016 aren’t as widespread as early 2015," CIBC adds.
Why? "In part because the strengthening US$ is starting to have a more material impact on the economy, hurting manufacturing and seeing the current account deficit widen," CIBC answers.
"We think that trend will continue, forcing the Fed to enact one fewer hike than they expect in 2016, which would help curb the US$’s appreciation longer term," CIBC argues.
- Free trading apps
- Over 8,000 signals for copying
- Economic news for exploring financial markets
You agree to website policy and terms of use
The new year will usher in a fresh crop of Federal Open Market Committee voters, making it time for an updated breakdown of where policy makers stand as the focus shifts to the timing of the next interest rate increase.
The four votes that rotate among the reserve bank presidents -- excluding New York, which has a permanent vote -- will change hands in January, and appear slightly more hawk-heavy. The newcomers include three hawks and a dove and replace a hawk, a dove and two neutrals.
Of permanent voters, we’ve tweaked the scores for Governor Lael Brainard and New York Fed chief William Dudley. Those changes cancel each other out, however, and there’s no change for Chair Janet Yellen, by far the most important member.
Officials must weigh the timing of their next interest rate hike following liftoff on Wednesday that ended seven years of near-zero borrowing costs. The next meeting is on Jan. 26-27, followed by an FOMC gathering on March 15-16 that will also be accompanied by a press conference. Investors see no chance of a move in January and a 42 percent probability of action in March, based on trading in federal fund futures.
We’ve also added tentative initial scores for Robert Kaplan and Patrick Harker, the new presidents in Dallas and Philadelphia. Stay tuned for a rating on the incoming Minneapolis head, Neel Kashkari, who takes over for uber-dove Narayana Kocherlakota on Jan. 1. None of those three new presidents will vote in 2016, but all will have a chance to air their views during FOMC meetings, influence voters and help shape policy statements.
The new voters will be Boston’s Eric Rosengren, Cleveland’s Loretta Mester, Kansas City’s Esther George and James Bullard from St. Louis. They replace John Williams from San Francisco, Chicago’s Charles Evans, Richmond’s Jeffrey Lacker and Atlanta’s Dennis Lockhart.
Bloomberg economics reporters applied a subjective ranking based on each member’s public record: A score of three doves indicates they’re most inclined toward an easy policy that favors job creation; three hawks show that they’re on the sharpest lookout for inflation and ready to tighten policy.
read more