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US: A calming voice from the Fed? - ING

Analysts at ING suggest that the US government shutdown is adding to a sense of unease, and barring any sudden breakthrough on Capitol Hill, which is likely to result in a delay to the release of trade and durable goods orders numbers scheduled.

Key Quotes

“The key events this week will be comments from Federal Reserve officials. At the December FOMC meeting, they scaled back their expectations for monetary policy, suggesting two 25 basis point moves was the most likely scenario for 2019, down from the three hikes they had pencilled in back in September. Amidst all the current doom and gloom, financial markets are not even fully pricing in one move this year.”

While there certainly are more headwinds for the US – lagged effects of higher borrowing costs, a strong dollar, fading fiscal stimulus and weaker external demand at a time of rising trade protectionism – there are also positives, with the strong jobs market delivering higher pay and the recent plunge in gasoline prices boosting household cashflows.”

“As such, we expect the bulk of Fed speakers to remain cautiously optimistic while soothing the concerns about an overly aggressive response from the central bank to any perceived inflation threat. In this regard, we expect December headline inflation to be pulled lower by energy price moves while core inflation remains at 2.2%.”



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