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15 Sep 2015
FOMC: tight policy not warrented - BBH
FXStreet (Guatemala) - Analysts at Brown Brothers Harriman explained that they suspect if the Fed does not hike rates this week, its statement will be rather hawkish, suggesting a rate hike has been delayed, but that it is still forthcoming.
Key Quotes:
"Parallels could be drawn between this and September 2013, when nearly everyone (not us) thought that the Fed could announce the tapering of QE3+. Instead it waited until December.
As Fed officials have noted, and we concur, raising the Fed funds target to 25-50 bp, given the current economic conditions cannot fairly be considered tight monetary policy. It would be wee bit less easy, but still highly accommodative on almost any reasonable metric.
The 0-25 bp current Fed funds target was an emergency setting. If the economy was performing then as it is now, would the Fed have adopted the near-zero interest rate policy? Mostly likely not. Tight monetary policy is not warranted (as the QE4 camp argues), but nor is an emergency setting that denies officials the use of traditional monetary policy."
Key Quotes:
"Parallels could be drawn between this and September 2013, when nearly everyone (not us) thought that the Fed could announce the tapering of QE3+. Instead it waited until December.
As Fed officials have noted, and we concur, raising the Fed funds target to 25-50 bp, given the current economic conditions cannot fairly be considered tight monetary policy. It would be wee bit less easy, but still highly accommodative on almost any reasonable metric.
The 0-25 bp current Fed funds target was an emergency setting. If the economy was performing then as it is now, would the Fed have adopted the near-zero interest rate policy? Mostly likely not. Tight monetary policy is not warranted (as the QE4 camp argues), but nor is an emergency setting that denies officials the use of traditional monetary policy."