Long-held view has been that, the Fed would deliver the first Fed funds rate
hike in September this year. This view is based on expectation that, US GDP
growth should be in the 2.5-3.0% range in the current and coming quarters driven
by solid private consumption, continued improvement in the housing markets, a
pickup in wage growth and continued solid employment gains. The main risk to our
call for a September rate hike has been so-called international developments, in
particular risks to US growth and financial conditions stemming from Greece and
China. With the agreement between Greece and its creditors on Monday morning,
these risks have diminished significantly, says Danske Bank.
The other source of risk, China, has also become less imminent after the stabilization in Chinese equity markets and remains fundamentally positive on economic growth in China this year. With risks from Greece and China diminishing, the Fed's focus is likely to return to domestic developments and this will ultimately decide the timing and pace of rate hikes.The recent data releases give no reason to doubt that, forecast of a first hike will be in September and an additional hike in December.
" One way to illustrate the broad-based improvement in US data over the past month is looking at the development in Atlanta Fed's tracking estimate of Q2 GDP growth. From 1 June to 7 July, the estimate moved from 0.8% q/q AR to 2.3% q/q AR. We expect Q2 GDP growth to end up around to 2.5% q/q AR. The 'dot plot' released with the 17 June FOMC meeting suggested that the most influential members of the FOMC were projecting only one rate hike this year, although the majority of the FOMC was still pencilling in two hike. However, it is believed that, data released since then is likely to have moved more into the camp expecting to hike rates in September" notes Danske Bank.
This is also what is learned from recent key speeches. Asked about the probability of a September hike, New York Fed President William C. Dudley on 26 July stated, if the data continue to evolve in the way they have, I think September is very much in play. This was backed by Chair Janet Yellen in a speech this Friday, when she stated that based on my outlook, I expect that it will be appropriate at some point later this year to take the first step to raise the federal funds rate. Notably, Greece got exactly six words in Yellen's speech and China none, while measures of labour market slack in the US were discussed at length
Source : FX-Primus
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The other source of risk, China, has also become less imminent after the stabilization in Chinese equity markets and remains fundamentally positive on economic growth in China this year. With risks from Greece and China diminishing, the Fed's focus is likely to return to domestic developments and this will ultimately decide the timing and pace of rate hikes.The recent data releases give no reason to doubt that, forecast of a first hike will be in September and an additional hike in December.
" One way to illustrate the broad-based improvement in US data over the past month is looking at the development in Atlanta Fed's tracking estimate of Q2 GDP growth. From 1 June to 7 July, the estimate moved from 0.8% q/q AR to 2.3% q/q AR. We expect Q2 GDP growth to end up around to 2.5% q/q AR. The 'dot plot' released with the 17 June FOMC meeting suggested that the most influential members of the FOMC were projecting only one rate hike this year, although the majority of the FOMC was still pencilling in two hike. However, it is believed that, data released since then is likely to have moved more into the camp expecting to hike rates in September" notes Danske Bank.
This is also what is learned from recent key speeches. Asked about the probability of a September hike, New York Fed President William C. Dudley on 26 July stated, if the data continue to evolve in the way they have, I think September is very much in play. This was backed by Chair Janet Yellen in a speech this Friday, when she stated that based on my outlook, I expect that it will be appropriate at some point later this year to take the first step to raise the federal funds rate. Notably, Greece got exactly six words in Yellen's speech and China none, while measures of labour market slack in the US were discussed at length
Source : FX-Primus
#FX
#SaleForex
#Forex
#LongHeldView
#FedsFundsRates
#LabourMarket
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