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Majority of Fed’s voting members favour a 2015 lift-off - RAbobank

FXStreet (Delhi) – Philip Marey, Senior US Strategist at Rabobank, suggests that if we look at the reactions of the voting members of the FOMC, there still seems to be a large majority that would like to hike before the end of the year. In the end, their case will depend on the data that we are going to see before the meeting on December 15 and 16, and that is still a lot, the analyst adds.

Key Quotes

“The US CPI data for September were better than expected by the market. Headline inflation slowed down to 0.0% in year-on-year terms, from 0.2% in August, but the consensus expectation of negative inflation (-0.1%) was averted.”

“What’s more, core inflation – which excludes the volatile food and energy prices – unexpectedly rose to 1.9% from 1.8%. These data should bolster the Fed’s confidence that inflation will return to the 2% objective over the medium term.”

“This was reinforced by the decline of US initial jobless claims to 255K after 262K a week before. This matches the 2015 low reached earlier in mid-July. Note that 255K is not only the lowest point of this year, but in fact the lowest since 1973. Despite the slowdown in the world economy, US businesses are keen to keep their personnel on board.”

“Meanwhile, the first two US business surveys for October both indicated a deterioration, although at a milder pace than in September. However, the Empire manufacturing index (-11.4) and the Philly Fed index (-4.5) both fell short of consensus expectations.”

“New York Fed President William Dudley, a permanent voter on the FOMC, acknowledged that the economy is slowing. Nevertheless, he still favors raising rates later this year if his forecasts are met.”

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