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Fed selling the US recovery story - Rabobank

FXStreet (Barcelona) - Analysts at Rabobank explained that the dovish September Fed minutes show the FOMC recognized that even shifting their language could see a repeat of the huge market volatility of May-August last year.

Key Quotes:

“The simple act of dropping the words “considerable time” was problematic despite the fact that according to both the Fed’s own forecasts, and the statements of some members, we are apparently within touching distance of a rate hike”.

“Instead, the Fed’s language used in future statements would be allowed to “evolve”, the minutes argue. Cynics may note that evolution generally takes millions of years”.

“Certainly, the global economy (i.e., China and Europe) got a mention for the first time as supporting characters, and ones that could dampen the apparently-rosy US outlook (and this was back in mid-September, whereas things have certainly deteriorated since then); and the same was also true for the potential negative impact of the stronger USD in recent months (which is also stronger now than then)”.

“Taken together it appears the Fed are happy to constantly sell the US recovery story, but not to act on it on the rates front (yet?). That is very similar to the feel-good scripts other central banks have been peddling around the market for years without much success”.

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