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US: FOMC minutes kept 2015 lift-off expectation alive – ING

FXStreet (Delhi) – Rob Carnell, Chief International Economist at ING, suggests that the recent FOMC minutes had kept 2015 rate hike expectations alive.

Key Quotes

“Although the October labour market report drove a stake into the heart of forecasts for an October hike, the minutes from the September FOMC meeting made it clear that for most members, 2015 remains on track, and the October labour report should be seen as a “miss”, rather than a negative outcome, which resulted in no improvement in the Fed’s Labour market conditions indicator, rather than a step backwards.”

“The key phrase in the text seems to be “Many members said that the improvements in labour market conditions met, or would soon meet one of the Committee’s criteria for beginning policy normalisation”. Further falls in the unemployment rate in the months ahead, and hopefully some return to payrolls trends closer to 200K than we have seen recently would help drive that commitment to normalisation further.”

“But one thing above all else would prompt the Fed to sit up and re-evaluate their cautious stance, and that is wages growth. Whilst this remains subdued, there is still a group within the Fed that believes that payrolls gains and unemployment falls mask the true, and weaker state of the US labour market. If wages start to rise, this view will be very difficult to maintain. And rates will rise promptly if they have not begun to do so already.”

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