Market Starts to Doubt Rate Hike But Fed Will Be Patient

While there are growing doubts among economists that the Federal Reserve will make their first hike in short-term interest rates in June, don’t look for the U.S. central bank to give any hints that it may hold stay a little while longer than expected.

The Federal Open Market Committee will meet for two days beginning Tuesday to set monetary policy for the next six weeks and will release a statement at 2 p.m. on Wednesday. There will be no press conference.

“We think the FOMC will be reluctant to make changes to the statement that might influence expectations for Fed action, particularly when there is no press conference to explain any ‘meaningful’ additions or deletions to the text,” said Michelle Girard, chief U.S. economist at RBS Securities, in a note to clients. Economists at RBS, Goldman Sachs and Wrightson ICAP have pushed their forecast for the first Fed move from June to September.

“Policymakers don’t seem ready to admit defeat on a mid-year hike just yet,” added Ellen Zentner, economist at Morgan Stanley, in a research note.

To be sure, most economists are sticking with forecast of a June rate hike, according to the latest Blue Chip survey, possibly because that’s what many Fed officials have signaled in the past.

Skeptics that the Fed will be able to move in June think the outlook for inflation will be the key.

via Marketwatch

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza