Flash: In the unchartered territory of the Fed´s numerical thresholds - Societe Generale

FXstreet.com (Barcelona) - Societe Generale strategists note that the Fed could move towards numerical economic thresholds in 2013, conditioning how long it will continue to ease and edging closer to the Woodford and Evans prescriptions.

They ask, “How could such an experimental but radical shift reshape the market’s perception of an
already ultra-dovish Fed?” They see that this new style of forward guidance, which would credibly generate inflation expectations in the private sector, could provide a jolt to risk assets, gold and high beta currencies.

Further, they add that plugging FOMC forecasts into the standard Taylor rule reveals that the first hike should occur in accordance with the current forward guidance (mid-2015). They feel that it does not suggest that the Fed is yet ready to be accommodative for much longer than economic developments would require and that leaves room for innovative policies.