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2 Apr 2015
Fed might hike rates in Q4 – Rabobank
FXStreet (Barcelona) - Philip Marey of Rabobank, explains that the poor economic data out of the US and the aftermath of USD strength show suggests that Q4 would be the likely timing for Fed to begin its rate hike.
Key Quotes
“While the FOMC has opened the door to a June rate hike, we doubt that the data will give the Committee the ‘reasonable confidence’ to jump at the first opportunity.”
“While the US jobs engine seems in full swing, other data on economic activity are less upbeat. Although bad weather may be partly responsible, 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 as is evident in purchasing manager indices and corporate earnings.”
“At present, US firms are still hiring, but these decisions are by nature lagging. In particular, firms are more hesitant about their investment plans going forward, as can be seen from the durable goods orders.”
“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
“While the FOMC has opened the door to a June rate hike, we doubt that the data will give the Committee the ‘reasonable confidence’ to jump at the first opportunity.”
“While the US jobs engine seems in full swing, other data on economic activity are less upbeat. Although bad weather may be partly responsible, 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 as is evident in purchasing manager indices and corporate earnings.”
“At present, US firms are still hiring, but these decisions are by nature lagging. In particular, firms are more hesitant about their investment plans going forward, as can be seen from the durable goods orders.”
“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.”