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16 Mar 2015
Removing ‘patient’ will give Fed more flexibility for policy setting – BTMU
FXStreet (Barcelona) - According to Lee Hardman, Currency Analyst at Bank of Tokyo-Mitsubishi UFJ, Fed might remove the ‘patient’ signal in this week’s meeting, and confirm that the June rate hike plan is on track, which would boost USD strength further.
Key Quotes
“The US dollar has remained stronger in the Asian trading session ahead of the FOMC’s upcoming meeting on Wednesday. The Fed is expected to drop its signal that it can be “patient” before beginning to normalize monetary policy.”
“By removing the “patient” signal it will allow the Fed to set monetary policy with more flexibility in response to incoming economic data.”
“The recent strength of the US labour market is increasing pressure on the Fed to begin raising rates gradually from around the middle of this year most likely in either June or September when the Fed is reasonably comfortable as well that inflation will return back to 2% in the medium-term.”
“Fed Chair Yellen has clearly highlighted that removing “patient” will not necessarily signal that a rate hike will come as soon as June although the risk of a rate hike in the near-term will increase.”
“The foreign exchange market will also be watching closely to assess if there is any change in rhetoric from the Fed’s regarding the US dollar given its continued sharp strengthening.”
“The stronger US dollar may support more gradual tightening which is likely to be reflected in the updated projections for the Fed funds rate which will be lowered, although they are likely to remain less dovish than current market expectations.”
“Overall this week’s FOMC meeting is likely to confirm that the Fed remains on track to gradually raise rates from around the middle of this year, and the widening policy divergence should remain supportive for a stronger US dollar.”
Key Quotes
“The US dollar has remained stronger in the Asian trading session ahead of the FOMC’s upcoming meeting on Wednesday. The Fed is expected to drop its signal that it can be “patient” before beginning to normalize monetary policy.”
“By removing the “patient” signal it will allow the Fed to set monetary policy with more flexibility in response to incoming economic data.”
“The recent strength of the US labour market is increasing pressure on the Fed to begin raising rates gradually from around the middle of this year most likely in either June or September when the Fed is reasonably comfortable as well that inflation will return back to 2% in the medium-term.”
“Fed Chair Yellen has clearly highlighted that removing “patient” will not necessarily signal that a rate hike will come as soon as June although the risk of a rate hike in the near-term will increase.”
“The foreign exchange market will also be watching closely to assess if there is any change in rhetoric from the Fed’s regarding the US dollar given its continued sharp strengthening.”
“The stronger US dollar may support more gradual tightening which is likely to be reflected in the updated projections for the Fed funds rate which will be lowered, although they are likely to remain less dovish than current market expectations.”
“Overall this week’s FOMC meeting is likely to confirm that the Fed remains on track to gradually raise rates from around the middle of this year, and the widening policy divergence should remain supportive for a stronger US dollar.”