Monetary policy normalization to be a function of Fed expectations and economic data – BBH

By FXStreet FXStreet (Delhi) – Marc Chandler, SVP at BBH, suggests that the pace that monetary policy can be normalized will be a function of the economic data in absolute terms and Fed expectations.

Key Quotes

“At the same time, the broad financial conditions, which include the dollar’s exchange rate and financial markets, will also be taken into account. We expect the pace of job growth to be moderate, but without a marked increase in the participation rate, it may still be sufficient to absorb slack in the labor market. This means unemployment (and underemployment) will likely decline. The fall in energy prices may help check headline inflation. Core measures are likely to increase on the back of higher rents and medical services.”

“Presidential election years without an incumbent running have tended to be associated with a small decline in equity prices. We do not see the election as having had much impact on the trajectory of Fed policy. At most, the Fed may want to avoid action at the November 2, 2016 FOMC meeting, which does not include updated economic forecasts, nor is it followed by a press conference.”

“There are several factors that make this cycle unique and arguably, even more challenging than …read more

Source:: FX Street