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USD strength and global slowdown weighed on Fed’s decision – Deutsche Bank

FXStreet (Delhi) – Adam Boyton, Chief Economist at Deutsche Bank, suggests that concerns around a slowing in global growth and also the impact on the real economy of the appreciation in the USD weighed on the Fed’s mind in the September FOMC meeting.

Key Quotes

“Members noted that recent global and financial market developments might restrain economic activity somewhat as a result of the higher level of the dollar and possible effects of slower economic growth in China and in a number of emerging market and commodity producing economies.”

“On when the Fed might start to lift rates, the minutes left the US central bank with some flexibility, with a 2015 start date not off the table (although no longer DB’s house view, with our US economists now looking for the Fed to increase rates at the March meeting).”

“In assessing whether economic conditions had improved sufficiently to initiate a firming in the stance of policy, many members said that the improvement in labor market conditions met or would soon meet one of the Committee’s criteria for beginning policy normalization.”

“But some indicated that their confidence that inflation would gradually return to the Committee’s 2 percent objective over the medium term had not increased, in large part because recent global economic and financial developments had imparted some restraint to the economic outlook and placed further downward pressure on inflation in the near term.”

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