FOMC: Inflation will be key in 2016 – Nomura

By FXStreet FXStreet (Guatemala) – Analysts at Nomura explained that the FOMC’s statement, and Federal Reserve Chair Yellen in the press conference following the decision, stressed three broad points about how the FOMC is likely to approach subsequent changes in interest rates.

Key Quotes:

“First, the Committee noted in several places that it expects the coming adjustment of interest rates to be “gradual.” Second, the FOMC statement stressed that the actual pace of adjustment will depend on how the economy evolves. Finally, the Committee said that “progress toward their objectives”—both realized and expected—would drive subsequent decisions to raise interest rates. The FOMC stressed that the actual path for inflation will be particularly important. This language raises the bar somewhat for a subsequent rate hike. Note that the FOMC was prepared to make the decision to raise rates for the first time based only on “reasonable confidence” in its forecast that inflation would rise going forward.

Going forward, Chair Yellen indicated that the Committee will require greater evidence that its forecast for rising inflation is being realized. The FOMC’s economic forecasts are shown in Figure 3. The changes relative to the forecasts made in September are modest. However, the FOMC did raise its forecast …read more

Source:: FX Street