FOMC minutes: Increasingly cautious – ING

By FXStreet Rob Carnell, Chief International Economist at ING, suggests that worries about tighter financial conditions, weaker domestic lending and overseas turbulence are raising the risks of inaction for the Fed for the foreseeable future.

Key Quotes

“The latest set of FOMC minutes presented a cautious assessment of the economic backdrop, which all but rules out a March rate hike, or indeed, one any time soon unless conditions change.

Citing tighter financial conditions as one reason for keeping things on hold for the time being, the central bank is really referring to the appreciation of the trade weighted dollar, but also to recent declines in equity prices, and wider spreads of riskier corporate bonds. But the minutes also referred to tighter lending conditions from banks – equivalent to a monetary tightening, which might suggest more of an impact from the recent rate hike than the FOMC might have imagined likely back in December.

One of the causes for this financial conditions tightening, and also a reason for extended caution in its own right, was the turbulence in external financial markets, and explicitly concern over China. Canada and Mexico were also mentioned in this regard.

These concerns negate some of the more positive developments …read more

Source:: FX Street