The Federal Open Market Committee (FOMC) of the US Federal Reserve meet this week, here's a preview.
- The FOMC meets Tuesday and Wednesday (16 and 17 June 2015)
- Will release its statement at 2pm US eastern time on Wednesday
- That's 1800GMT 17 June 2015
- Federal Reserve Chair Janet Yellen will hold a press conference following the announcement, at 2:30pm eastern (1830GMT)
- At this meeting, FOMC members will release updated economic forecasts (the 'dots')
Just doing a bit of a catch up, here are 8 'what to expect's in brief:
BoA / Merrill Lynch
- "While a June Fed rate hike is very unlikely, the FOMC will keep open the option for liftoff in September
- The dot plot should still have 2 hikes this year and 4 next, even as the long-run dot drifts down to 3.5%, in our view
- Listen to Yellen's tone; she should sound upbeat on the outlook, but any signs of low inflation concerns would be notable."
BNP:
- "With dovish messages from the SEP and "dot plot", and more hawkish messages from the policy statement and press conference, we expect the overall message to be bearish
- The FOMC will likely signal that they are packed and ready to go, just waiting on the sidelines for the data to give them the green light for lift-off
- Yellen to lay the groundwork for a September rate hike at her press conference on Wednesday. Data this week are likely to support a September 'lift-off'"
(Note - SEP is Summary of Economic Projections - it reports on real GDP growth forecasts from the Federal Reserve Board members and Federal Reserve Bank presidents)
CitiFX (Steve Englander) comments on the timing of a Fed hike & what it might mean for the dollar ... will an earlier hike be a catalyst for "round 2 of the USD gains?"
- Says an earlier than expected Fed lift-off is likely to mean faster rate hikes
- Around 2/3 of 200 respondents to a poll expect a September 'lift-off' & " ... those who look for a June-September lift-off see fed funds rising about 40bps faster in the 2 years after lift-off than those who see who expect lift-off in October-December or later
- That is not only statistically significant, but is big enough to matter for FX, bonds and other asset markets"
- They "will have a big adjustment to make if a a delayed lift-off convinces them that a subsequent lift-off will be slower"
- On the other hand ... the respondents looking for a later beginning to the hikes "will find themselves making a big adjustment if an earlier move signals a more active Fed than they were expecting"
Credit Suisse:
- "expect the FOMC next week to acknowledge the recent improvement in US economic data
- But, the rebound is still building momentum and has not been sufficiently conclusive, in our view, to prompt the Fed to hike as soon as next week
- Although we assign a small probability to a July rate hike, say 15%, September still appears the most likely date for policy lift-off
- Various scenarios related to the 16-17 June meeting include the possibility of more explicit guidance in the policy statement on the timing of a rate hike (unlikely), downward revisions to growth forecasts (likely for 2015 especially), and possible declines in estimates of the long-run neutral fed funds rate target"
Société Générale look for:
- a "cautiously optimistic statement and press conference
- Reflecting the recent acceleration in job growth and the modest pickup in growth after the sharp slowdown in Q1"
- From the Summary of Economic Projections "the FOMC will likely downgrade its 2015 GDP forecast", "leave the unemployment rate path unchanged"
- "This could potentially lead to a modest downgrade of longer-run growth and the longer-run funds rate. We expect the dots to show only one hike this year and four next year"
Barclays:
- "We expect the Fed to maintain its base case outlook of hiking twice this year
- ... Risk of a dovish message, as the "dots" are again likely to drift lower"
Bank of Montreal expect a more sightly dovish lean:
- Fed Funds dot plot median for 2015 "should stay roughly the same (around 0.63%) but the mean (at 0.77%) will probably drop as the most hawkish calls are reined-in a bit
- The median and mean for 2016 (1.88% and 2.02%, respectively) could both be shaved back a bit reflecting the hawks' now lower starting points and, importantly, a greater conviction among the doves that the policy normalization process is going to be very gradual"
CIBC:
- Caution that Fed Chair Janet Yellen will be aware that back in 2004, the Chair Alan Greenspan "waited way too long before he started hiking in June 2004", while "inflation was already on a clear accelerating path" then
- But, the Federal Reserve "wants to move very slowly during the upcoming tightening cycle. In order to do that, Yellen will have to fire the first bullet prior to any notable acceleration in inflation"
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Stay tuned to ForexLive as we approach Wednesday for more previews and what to expects.