The pre-prepared text from Yellen’s speech at Jackson Hole today didn’t necessarily offer much in the way of surprises but it did confirm one thing, there is now a clear and public hawkish consensus building within the Fed and Chair Yellen is on board.
The last time we saw this was at the start of the summer when it appeared that the Fed was intending to raise rates, only for the UK to throw a spanner in the works with Brexit. We also saw a similarly hawkish PR offensive towards the end of last year just before the Fed raised rates for the first time in almost a decade. I don’t think this is a coincidence and unless something interferes again – which it easily could and has repeatedly over the last year – I think we’ll see another hike this year, possibly even as early as September. The only issue with September is that prior to the release of the text, markets had all-but priced this out and it would take something substantial to get them on board prior to the meeting. December may make more sense followed by another in the first half of next year.
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