9 Jul 2015
FOMC Minutes: Key Implications - TDS
FXStreet (Barcelona) - James Marple, Senior Economist at TD Securities, offers the key implications from the Fed minutes, noting that the accounts of the June FOMC meeting maintained a relative upbeat tone.
Key Quotes
“The tone of the minutes reflected the relatively upbeat tone of the Fed's June statement. While a minority of Fed members expressed concern about beginning to tighten rates prematurely, the consensus appears to be that as long as expectations for continued improvement are met, interest rates will begin to rise. Reading between the lines, it would seem that most members didn't think they'd have this confirmation by July, but they expected it to be there by September.”
“The U.S. economy has continued to improve since the Fed's mid-June meeting, but a number of developments have added downside risk to both the economic and inflation outlook. In particular, the increased likelihood of a Greek exit from the euro area and the recent equity sell off in China have gone in exactly the direction that the Fed feared in these minutes. Moreover, while the minutes expressed some comfort that oil prices had stabilized and that import prices would soon too, this has been called into question by more recent events.”
“The bottom line is that as long as financial conditions remain relatively benign and the job market (which continues to be supported by record levels of job openings) continues to improve, it is not yet time to give up on the liftoff story. Nonetheless, the Fed will be cautious in the pace of rate hikes and should conditions deteriorate further it will hold off, but not indefinitely.”
Key Quotes
“The tone of the minutes reflected the relatively upbeat tone of the Fed's June statement. While a minority of Fed members expressed concern about beginning to tighten rates prematurely, the consensus appears to be that as long as expectations for continued improvement are met, interest rates will begin to rise. Reading between the lines, it would seem that most members didn't think they'd have this confirmation by July, but they expected it to be there by September.”
“The U.S. economy has continued to improve since the Fed's mid-June meeting, but a number of developments have added downside risk to both the economic and inflation outlook. In particular, the increased likelihood of a Greek exit from the euro area and the recent equity sell off in China have gone in exactly the direction that the Fed feared in these minutes. Moreover, while the minutes expressed some comfort that oil prices had stabilized and that import prices would soon too, this has been called into question by more recent events.”
“The bottom line is that as long as financial conditions remain relatively benign and the job market (which continues to be supported by record levels of job openings) continues to improve, it is not yet time to give up on the liftoff story. Nonetheless, the Fed will be cautious in the pace of rate hikes and should conditions deteriorate further it will hold off, but not indefinitely.”