Fed hikes likely later this year but pace to be gradual - Barclays

Barclays Capital's reaction to today's FOMC Minutes from the March meeting:

The minutes from the March FOMC meeting did not shine much new light on the committee's thinking relative to what was revealed in the statement, projection materials, and press conference. This should not come as a surprise; the Fed's quarterly meetings with press conferences contain a lot of information and there is a fairly low probability that the subsequent minutes will contain much that is new. Nevertheless, the minutes reinforce the message sent by the committee on March 18.

Namely, that enough progress has been made to warrant the removal of forward guidance, a large majority of FOMC participants see rate hikes coming in late 2015 (e.g., September to December), and the subsequent pace of rate hikes is likely to be gradual.

We view September as the likely timing for the first rate hike, with some probability that the committee waits until December should core inflation be dragged lower by falling import prices. Our baseline expectation is for the federal funds rate to be hiked twice in 2015 and finish the year at the target of 50-75bp.

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