Back
24 Feb 2015
Yellen with an opportunity to set stage for tightening later this year - RBS
FXStreet (Bali) - Paul Robson, Senior Trading Desk FX Strategist at RBS, notes that Yellen’s Semi-Annual Testimony gives the Chair an opportunity to set the stage for tightening later this year.
Key Quotes
"The dovish tone of last week’s FOMC Minutes does not change the outlook for Fed policy in our view, as they predate January’s robust US payroll report. Yellen’s Semi-Annual Testimony (aka Humphrey Hawkins Testimony) gives the Chair an opportunity to set the stage for tightening later this year."
"Chair Yellen is unlikely to drop patient forward guidance language at her testimony this week, though an update to guidance is likely needed at the March meeting. On this week’s US January CPI data, given the lower oil price, core will most likely be the more closely watched measure."
"Importantly, some categories in the January PPI that feed into the core PCE deflator, the Fed’s preferred inflation measure, introduce downside risks to the January Core PCE deflator released in early March."
"This said, the 'stronger dollar on policy divergence' and lower EUR/USD story doesn't require that the Fed raises rates in June (which is unlikely). It does require that ECB balance sheet expansion is ultimately much larger than hitherto discounted."
Key Quotes
"The dovish tone of last week’s FOMC Minutes does not change the outlook for Fed policy in our view, as they predate January’s robust US payroll report. Yellen’s Semi-Annual Testimony (aka Humphrey Hawkins Testimony) gives the Chair an opportunity to set the stage for tightening later this year."
"Chair Yellen is unlikely to drop patient forward guidance language at her testimony this week, though an update to guidance is likely needed at the March meeting. On this week’s US January CPI data, given the lower oil price, core will most likely be the more closely watched measure."
"Importantly, some categories in the January PPI that feed into the core PCE deflator, the Fed’s preferred inflation measure, introduce downside risks to the January Core PCE deflator released in early March."
"This said, the 'stronger dollar on policy divergence' and lower EUR/USD story doesn't require that the Fed raises rates in June (which is unlikely). It does require that ECB balance sheet expansion is ultimately much larger than hitherto discounted."