Fed: Hawkish Powell dents Goldilocks scenario for CEEMEAs - Rabobank

The upbeat message from Fed Chairman Powell, who expressed his optimism about the outlook for the US economy, reignited market concerns that the Fed may accelerate the pace of tightening this year, suggests the research team at Rabobank.

Key Quotes

 “My personal outlook for the economy has strengthened since December”, Powell said during his first testimony to Congress. He also stated that the Fed must balance the risk of the economy overheating with bringing inflation in line with the official 2% target.”

“We have been arguing on many previous occasions that the gradual pace of rate hikes by the Fed is an important element of the Goldilocks scenario for the CEEMEAs.”

“However, the prospects of the Fed seriously considering four hikes throughout 2018 lifted the US dollar against the CEEMEA currencies with the South African rand the weakest link as the bulls opted to take profits on the best performing EM currency.”