Fed rate hike is ‘likely appropriate soon’ - SocGen

Kit Juckes, Research Analyst at Societe Generale, suggests that the Lael Brainard added her notoriously dovish voice to the chorus of Fed Governors saying that a rate hike is ‘likely appropriate soon’.

Key Quotes

“If we hadn’t got the message before, we have now. Job done, less than two weeks to go before the meeting and if the US equity market is still in as perky a mood on 15 March as it was yesterday, there won’t be many reasons to dither any longer. With only jobless claims on today’s calendar, the next important driver of Fed sentiment comes with tomorrow’s speeches by the Fed Chair and Vice-Chair. Janet Yellen is speaking at 18:00 GMT tomorrow at the Executives Club in Chicago, Stanley Fischer half an hour earlier at Chicago Booth School. If they are singing from the same song sheet as Brainard and Dudley, market [pricing of a Fed move will get higher still.”

“For the dollar, I think the question is whether that moves the longer end of the curve. Whether the Fed’s next hike is in March, May or June is less important than whether they go twice or three times this year, and that in turn is less important than what the market prices as a terminal Fed Funds rate. At the moment, the market isn’t convinced that Fed Funds will peak much above 2%. A move higher from there would be more supportive for the dollar than any rethink about how fast we get to 2%. Which in turn, is reflected in the importance of longer-term yields for the dollar.”