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17 Sep 2015
FOMC decision: Yellen is no super-dove - BBH
FXStreet (Córdoba) - According to analysts from Brown Brothers Harriman the Federal Reserve decision to leave rates unchanged took into consideration recent developments in China and the greater volatility in capital markets.
Key Quotes:
“There is no escaping the fact the FOMC has been spooked by uncertainty raised by recent developments in China (though the FOMC statement did not specifically cite it) and the greater volatility of the capital markets. One can debate whether the Fed is correct or not, but to understand the way these decision-makers are thinking is very important.”
“Three Fed officials did not think it would be appropriate to raise rates this year, and one wants to wait until 2017. This underscores an important point. Obviously, Yellen is not the hawk that Lacker is, but she is not in the dove camp that favors waiting until 2017 either. This is Evans or Kocherlakota. Yellen is most likely one of the 76% that still see a hike this year. Despite not raising rates today, Yellen is no super-dove. That should not be lost in today's excitement.”
“Looking at the dots, the Fed has effectively taken out the hike that should have been delivered today. The June FOMC dot configuration showed the median expectation for two hikes this year. Today's plot removes that, which naturally lowers the 2016 and 2017 levels as well.”
“While many read the FOMC statement to be dovish, we suspect that the decision not to lift rates colored the reading. At her press conference Yellen sounds constructive, and makes it appear that today's decision was close. The recent developments, she says, have not changed the fundamental assessment.”
Key Quotes:
“There is no escaping the fact the FOMC has been spooked by uncertainty raised by recent developments in China (though the FOMC statement did not specifically cite it) and the greater volatility of the capital markets. One can debate whether the Fed is correct or not, but to understand the way these decision-makers are thinking is very important.”
“Three Fed officials did not think it would be appropriate to raise rates this year, and one wants to wait until 2017. This underscores an important point. Obviously, Yellen is not the hawk that Lacker is, but she is not in the dove camp that favors waiting until 2017 either. This is Evans or Kocherlakota. Yellen is most likely one of the 76% that still see a hike this year. Despite not raising rates today, Yellen is no super-dove. That should not be lost in today's excitement.”
“Looking at the dots, the Fed has effectively taken out the hike that should have been delivered today. The June FOMC dot configuration showed the median expectation for two hikes this year. Today's plot removes that, which naturally lowers the 2016 and 2017 levels as well.”
“While many read the FOMC statement to be dovish, we suspect that the decision not to lift rates colored the reading. At her press conference Yellen sounds constructive, and makes it appear that today's decision was close. The recent developments, she says, have not changed the fundamental assessment.”