25 Apr 2016
Fed likely to continue to be trapped – Deutsche Bank
Research Team at Deutsche Bank, suggests that with regards to the post-FOMC statement there is some debate as to whether the Fed will add back the "balance of risks" sentence which would re-open the door for a June rate hike.
Key Quotes
“We don't think they will do either but over the past week the probability of a June hike has increased from 14% to 23% (Bloomberg). One would expect the statement to be more confident given improved international conditions and a softer dollar of late but a Yellen led Fed will likely want to see more evidence of a US recovery before increasing the hawkish rhetoric again.
The data is still ambiguous and it's fair to say the global markets recovery is as much to do with the reduction of systemic risk (e.g. healthier $, EM, Oil and China news/moves) perhaps due to the early year Fed relent as it is to do with a strong pick up in growth. So the Fed continue to be trapped in our opinion.”
Key Quotes
“We don't think they will do either but over the past week the probability of a June hike has increased from 14% to 23% (Bloomberg). One would expect the statement to be more confident given improved international conditions and a softer dollar of late but a Yellen led Fed will likely want to see more evidence of a US recovery before increasing the hawkish rhetoric again.
The data is still ambiguous and it's fair to say the global markets recovery is as much to do with the reduction of systemic risk (e.g. healthier $, EM, Oil and China news/moves) perhaps due to the early year Fed relent as it is to do with a strong pick up in growth. So the Fed continue to be trapped in our opinion.”