Fed finally commences much awaited lift-off – Westpac

By FXStreet FXStreet (Delhi) – Richard Franulovich, Research Analyst at Westpac, notes that the US Fed finally initiated lift-off, raising the target range for Fed Funds by 0.25% to 0.25% to 0.50%.

Key Quotes

“Reflects the somewhat ‘dovish tilt” to the statement’s forward guidance where “gradualism” is stressed, Chair Yellen’s reference to the “pre-emptive” nature of today’s move, the observation that we have a “significant shortfall” on inflation, as well as the dot plot interest rate projections, which were trimmed.

The 2016 median was unchanged (four hikes) and the terminal Fed Funds rate was also left steady at 3.5% too, after steadily being cut for a while. Lift-off was unanimous too.

Activity is seen expanding “moderately”, as it has for a while. The labour market and inflation commentary head in opposite directions. The Fed seems to have upgraded their assessment of the labour market now that underutilisation of labour resources is seen to have diminished “appreciably” but on the inflation front the Fed notes longer-term inflation expectations have “edged down” vs “remained stable”.

The median for 2016 growth was upgraded a fraction from 2.3% to 2.4%, while 2017 through to the long run were unchanged. The unemployment rate saw the obligatory downward revisions to 4.7% …read more

Source:: FX Street