Fed remains on track to hike rates in next months – Deutsche Bank

FXStreet (Edinburgh) – Analyst at Deutsche Bank Jim Reid gave his opinions on the recent FOMC statement.

Key Quotes

“Indeed if you believed the Fed would raise rates in September before yesterday’s FOMC statement then you probably won’t have changed your mind”.

“They kept their options open but did add a sentence suggesting that job gains have been “solid” which hinted at their confidence in the economy”.

“However if you’re one of the doves then you’ll be pleased they removed the phrase “energy prices appear to have stabilized”.

“However if they hadn’t it would have been strange given recent moves. The most interesting change from the last statement was the tweak to its forward guidance as it added the word “some” to this sentence – “The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen SOME further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term.”

“Does this mean the bar has been lowered for what they need to see to pull the trigger. It’s still pretty vague and no doubt thousands of analysts around the globe will be spending hours debating the addition of a single word”.

“For us there are still great risks in starting a hiking cycle with the great fragility in the global economy and financial system, however the Fed don’t seem to share such a view and it’s going to be a close call for September. Much probably depends on the two interim payroll reports and whether commodities stabilise”.

Analyst at Deutsche Bank Jim Reid gave his opinions on the recent FOMC statement…

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