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No surprises by the Fed, Dec rate hike eyed - ANZ

FXStreet (Bali) - As ANZ Research Team notes, overall, nothing was found in Wednesday's FOMC minutes that change the market’s perspective of a Fed rate hike in December, currently priced at 66%.

Key Quotes

The FOMC meeting minutes for the 27-28 October meeting were released at 6am AEDT. It gave markets another chance to sift the tea leaves and assess the likelihood the Federal Reserve will raise the fed funds rate at its next meeting in December.

Overall, nothing was found to change the market’s view with a 66% chance of a December lift-off maintained. Adding to the fun, Fed Governors Lacker, Lockhart, Mester and Dudley all made public appearances overnight.

As usual, Richmond Fed President Jeffrey Lacker (who dissented in September and October, calling for higher rates) made some pretty hawkish pronouncements, stating that with strong consumer spending the case for a rate hike is strong, and that the Fed risks getting behind the curve and having to act more aggressively later.

Cleveland Fed President Loretta Mester supported a December lift-off, stating that the US economy can handle a 25bp rise in the fed funds rate.

Meanwhile, Atlanta Fed President Dennis Lockhart thinks that the US economy is on a reasonably solid path, with the Fed’s mandate on employment met and only transitory factors holding down overall inflation. However, he reiterated that the path of rate rises is likely to be relatively gradual and shallower than previous tightening cycles.

NY Fed President William Dudley conceded that “this is probably the most well-advertised, discussed, thought about, musedover prospect of beginning a normalisation of monetary policy in history” and as such, he is not expecting a significant market reaction when the Fed finally does raise rates.

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