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29 Oct 2014
FOMC to maintain a modestly dovish stance - Deutsche Bank
FXStreet (Łódź) - Jim Reid, Head of Global Fundamental Credit Strategy at Deutsche Bank, remarks that the Fed is not expected to make many changes at this week's monetary policy meeting, apart from those connected with ending QE.
Key quotes
"A big question mark will be as to whether they explicitly mention the recent volatility or tighter financial conditions similar to what they did in September last year."
"DB's Peter Hooper doesn't think so as back then Treasury yields had climbed over 100bps and the labor market had showed signs of slowing which hasn't happened this time round. Peter thinks they are concerned about there being an 'investor put' if they make too much of the volatility of two weeks ago."
"For us though its easy for them to act like this now that markets have recovered but it might be a little circular."
"The rebound started with Bullard's about turn suggesting that QE might be extended and also as markets started to price out 2015's interest rate rises. The rally soon got extra legs when speculation arose that the ECB might be considering buying corporate bonds."
"So if the Fed use this rebound to be too hawkish then it may backfire so we'd expect some compromise probably in the form of keeping considerable time in and emphasizing the global risks to growth and inflation."
Key quotes
"A big question mark will be as to whether they explicitly mention the recent volatility or tighter financial conditions similar to what they did in September last year."
"DB's Peter Hooper doesn't think so as back then Treasury yields had climbed over 100bps and the labor market had showed signs of slowing which hasn't happened this time round. Peter thinks they are concerned about there being an 'investor put' if they make too much of the volatility of two weeks ago."
"For us though its easy for them to act like this now that markets have recovered but it might be a little circular."
"The rebound started with Bullard's about turn suggesting that QE might be extended and also as markets started to price out 2015's interest rate rises. The rally soon got extra legs when speculation arose that the ECB might be considering buying corporate bonds."
"So if the Fed use this rebound to be too hawkish then it may backfire so we'd expect some compromise probably in the form of keeping considerable time in and emphasizing the global risks to growth and inflation."