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20 May 2015
FOMC Meeting: Markets might find the minutes a tad bit hawkish – KBC
FXStreet (Barcelona) - Although no new significant news can be expected from the FOMC Meeting, the dovish stance of the markets implies that the overcall outcome of the Fed Minutes might be taken as a bit hawkish, argues the KBC Bank Research Team.
Key Quotes
“The statement of the April 28-29 FOMC meeting was not too excited. The FOMC fully recognized the Q1 soft patch, in line with Q1 GDP. However, they believed it was (partly) transitory, even if it raises uncertainty about the economic outlook.”
“The Minutes may give us more insight in the debate on the economy (transitory?) and inflation. On inflation, the Fed kept silence on the somewhat better inflation news (higher) in the statement. Of course, while many within the Fed earlier suggested that a June liftoff was a real possibility, the weak GDP convinced observers that a June lift-off was off the table and a strong recovery would be needed for a lift-off in September.”
“The San Francisco Fed view that Q1 GDP may have been grossly understated (1.8% instead of 0.2%). Comments from Evans that some governors may still contemplate a June lift-off date from after the FOMC meeting, will be taken into account when reading the Minutes for clues about the prospects of a rate hike in June, September or even December.”
“We don’t expect the Minutes to suggest a change in the previous Fed view (March dots) that rates will still be raised in 2015 twice.”
“As the market is dovish about the Minutes, there may be an asymmetric risk that the market finds the Minutes a tad hawkish, but overall no earth quaking news to expect.”
Key Quotes
“The statement of the April 28-29 FOMC meeting was not too excited. The FOMC fully recognized the Q1 soft patch, in line with Q1 GDP. However, they believed it was (partly) transitory, even if it raises uncertainty about the economic outlook.”
“The Minutes may give us more insight in the debate on the economy (transitory?) and inflation. On inflation, the Fed kept silence on the somewhat better inflation news (higher) in the statement. Of course, while many within the Fed earlier suggested that a June liftoff was a real possibility, the weak GDP convinced observers that a June lift-off was off the table and a strong recovery would be needed for a lift-off in September.”
“The San Francisco Fed view that Q1 GDP may have been grossly understated (1.8% instead of 0.2%). Comments from Evans that some governors may still contemplate a June lift-off date from after the FOMC meeting, will be taken into account when reading the Minutes for clues about the prospects of a rate hike in June, September or even December.”
“We don’t expect the Minutes to suggest a change in the previous Fed view (March dots) that rates will still be raised in 2015 twice.”
“As the market is dovish about the Minutes, there may be an asymmetric risk that the market finds the Minutes a tad hawkish, but overall no earth quaking news to expect.”