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27 Jan 2015
Fed’s forward guidance unlikely to change – BBH
FXStreet (Barcelona) - The Brown Brothers Harriman Team previews the FOMC meeting, expecting Fed’s forward guidance in terms of “patience” to remain intact.
Key Quotes
““The Federal Reserve’s two-day meeting concludes Wednesday. To the extent the FOMC meeting is ever routine, this should be it. Its forward guidance evolved at the end of last year. The “considerable time” between the end of the asset purchase program (which it never called quantitative easing) and the first hike has been replaced with “patience”.”
“At Yellen’s first press conference last year, she abandoned the Fed’s purposeful strategic ambiguity, and suggested “considerable time” was around six months. She again yielded to temptation in December to define “patience” as a couple of meetings.”
“The January meeting is covered by that forward guidance. It is unlikely to change. The next meeting in March is a different story. If the Fed wants to prepare the market for a potential rate hike in the middle of the year, the March meeting, which will see updated macro-economic forecasts and a press conference, is more important. Patience at the March meeting would seem to preclude a June hike.”
“The decline in yields at the short-end of the curve, including the Fed funds and Eurodollar futures, suggest that the consensus expectations for a June hike may be fraying.”
Key Quotes
““The Federal Reserve’s two-day meeting concludes Wednesday. To the extent the FOMC meeting is ever routine, this should be it. Its forward guidance evolved at the end of last year. The “considerable time” between the end of the asset purchase program (which it never called quantitative easing) and the first hike has been replaced with “patience”.”
“At Yellen’s first press conference last year, she abandoned the Fed’s purposeful strategic ambiguity, and suggested “considerable time” was around six months. She again yielded to temptation in December to define “patience” as a couple of meetings.”
“The January meeting is covered by that forward guidance. It is unlikely to change. The next meeting in March is a different story. If the Fed wants to prepare the market for a potential rate hike in the middle of the year, the March meeting, which will see updated macro-economic forecasts and a press conference, is more important. Patience at the March meeting would seem to preclude a June hike.”
“The decline in yields at the short-end of the curve, including the Fed funds and Eurodollar futures, suggest that the consensus expectations for a June hike may be fraying.”