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31 Aug 2015
Fed’s lift-off in September still got legs – Deutsche Bank
FXStreet (Edinburgh) - Jim Reid, Analyst at Deutsche Bank, reviewed the recent comments by Fed’s S.Fischer.
Key Quotes
“Without pinning down any specific hints on timing but still leaving the September liftoff door open, Fischer’s tone certainly felt like it weighed on the more hawkish side, saying that the Fed should not wait until it meets its inflation goal while voicing confidence that prices should head higher”.
“Specifically, Fischer said that ‘given the apparent stability of inflation expectations, there is good reason to believe that inflation will move higher as the forces holding down inflation dissipate further’ and that ‘with inflation low, we can probably remove accommodation at a gradual pace’ however ‘because monetary policy influences real activity with a substantial lag, we should not wait until inflation is back to 2% to begin tightening’.
“The comments came a day after a TV interview with CNBC in which Fischer noted that ‘the change in the circumstance which began with the Chinese devaluation is relatively new and we’re still watching how it unfolds, so I wouldn’t want to go ahead and decide right now what the case is – more compelling, less compelling etc’, before noting that ‘we’ve got a little over two weeks before we make the decision’ and that ‘we’ve got time to wait and see the incoming data, and see what is going on now in the economy’.
Key Quotes
“Without pinning down any specific hints on timing but still leaving the September liftoff door open, Fischer’s tone certainly felt like it weighed on the more hawkish side, saying that the Fed should not wait until it meets its inflation goal while voicing confidence that prices should head higher”.
“Specifically, Fischer said that ‘given the apparent stability of inflation expectations, there is good reason to believe that inflation will move higher as the forces holding down inflation dissipate further’ and that ‘with inflation low, we can probably remove accommodation at a gradual pace’ however ‘because monetary policy influences real activity with a substantial lag, we should not wait until inflation is back to 2% to begin tightening’.
“The comments came a day after a TV interview with CNBC in which Fischer noted that ‘the change in the circumstance which began with the Chinese devaluation is relatively new and we’re still watching how it unfolds, so I wouldn’t want to go ahead and decide right now what the case is – more compelling, less compelling etc’, before noting that ‘we’ve got a little over two weeks before we make the decision’ and that ‘we’ve got time to wait and see the incoming data, and see what is going on now in the economy’.