Fed confidence rising – Rabobank

By FXStreet Analysts at Rabobank explained recent US data supports Chair Yellen’s defiance of negative market sentiment during her testimony to Congress on February 10.

Key Quotes:

“This week, Vice Chair Fischer said that the US may be seeing the first stirrings of a long-awaited increase in inflation as the impact of a strong jobs market works its way through the economy. At the same time, not all the doves are convinced and they would like to see more evidence of inflation moving back toward the 2% target.

This suggests that we should not expect a rate hike as early as next week, but we may see a consensus forming by the June meeting. We stick to our call of two hikes this year, most likely one in June and another in December.

Note that markets are now pricing in one hike this year, in June. However, this is only a recent insight as a few weeks ago they were not pricing in any rate hike this year.

At the same time, as wage pressures remain subdued, we do not think that the Fed will deliver the four hikes implied by the December dot plot. In fact, we may see a downward revision to three hikes …read more

Source:: FX Street