MNI Fedwatcher Steve Beckner reports that the Federal Reserve may wait longer to hike or may hike at a slower pace.
“Low inflation, reduced inflation expectations and slow wage growth, together with dollar appreciation in a weakening global economy, are exerting an increasingly cautionary influence on Fed policymakers,” he writes.
While not directly citing ‘Fed sources’ he writes ‘MNI is told’ and ‘MNI understands’, alluding to some type of official guidance.
If these trends persist – if wages and prices do not pick up and if overseas developments darken the U.S. economic outlook – both the timing and pace of rate hikes could be affected, MNI is told.
There are a lot of ‘ifs’ in that statement to go along with low wages so it’s hardly groundbreaking but it speaks to the larger conversation going on in markets right now.
In the Summer, the pound rallied relentlessly on talk of rate hikes as soon as January but when it became clear those hikes weren’t coming, the air came out of the rally in a flash. I’d say the likelihood of the same kind of move in the dollar is smaller, if only because there’s obvious alternative to buying dollars.
Yellen – deer in deflationary headlights
