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18 Mar 2015
A very dovish announcement from the Fed - SocGen
FXStreet (Bali) - According to Societe Generale, despite the removal of "patience", it was a very dovish announcement from the Fed today.
Key Quotes
"Despite the removal of "patience", this is a very dovish announcement from the Fed. The dots came down quite substantially, with the median forecast now projecting only two hikes this year (vs. 4 previously). More importantly, the 2016 and 2017 dots came down as well, by 0.625% and 0.5% respectively."
"Interestingly, the medium-term forecasts did not change, with core PCE inflation still expected to get to a 1.8-2.0% range by the end of 2017, and with the unemployment rate now expected to go lower (the new end-of-2017 range is 4.8-5.1, down from 4.9-5.3). That said, they also dropped their estimate of NAIRU quite sharply and now see it at 5.1%. Based on their forecasts, we won't be at full employment until the end of the year, so that is probably why they are comfortable with a more relaxed reaction function (i.e. lower dots)."
Key Quotes
"Despite the removal of "patience", this is a very dovish announcement from the Fed. The dots came down quite substantially, with the median forecast now projecting only two hikes this year (vs. 4 previously). More importantly, the 2016 and 2017 dots came down as well, by 0.625% and 0.5% respectively."
"Interestingly, the medium-term forecasts did not change, with core PCE inflation still expected to get to a 1.8-2.0% range by the end of 2017, and with the unemployment rate now expected to go lower (the new end-of-2017 range is 4.8-5.1, down from 4.9-5.3). That said, they also dropped their estimate of NAIRU quite sharply and now see it at 5.1%. Based on their forecasts, we won't be at full employment until the end of the year, so that is probably why they are comfortable with a more relaxed reaction function (i.e. lower dots)."