FOMC Preview: Higher probabilities for a rate hike in December – Rabobank

By FXStreet FXStreet (Córdoba) – According to Philip Marey, Senior US Strategist at Rabobank, a rate hike by the Federal Reserve in September remains a distinct possibility. They continue to attach higher probability to a rate hike in December.

Key Quotes:

“After a decline in unemployment to 5.1%, the labor market has shown ‘some further improvement’ and looking at the employment leg of the Fed’s dual mandate, a case can be made for a September rate hike.”

“The Fed is failing on the price stability leg of the mandate with inflation standing at 0.3% and core inflation falling to 1.2%. The concerns about the inflation outlook that existed back in July have risen due to the developments in China in August. Therefore, the doves in the FOMC are not likely to have the ‘reasonable confidence’ that inflation will return to its 2% target needed for a rate hike this month.

“On balance, while a September hike remains a distinct possibility, we continue to attach a higher probability to a December lift-off. The doves may prefer to wait and see how inflation pressures evolve in the near future and in particular how the Chinese slowdown is affecting the inflation outlook.”
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Source:: FX Street