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20 Mar 2014
FOMC QE3 targeted to end, when?- Rabobank
FXStreet (Guatemala) - Analysts at Rabobank explained the fed funds rate projections of the FOMC participants indicated that the median forecast for the end of 2015 had moved up to 1.00% from 0.75% in the December projections, and the median forecast for the end of 2016 had moved up to 2.25% from 1.75%.
Key Quotes:
“This hawkish shift pushed up the 10y US treasury yield, and made the S&P500 and the EUR/USD take a step back. During the Q&A at the press conference Yellen said that we should not look at the ‘dot plot’ because the dots will fluctuate, but that the FOMC statement was the primary means of communication. And the statement said that the change in forward guidance does not indicate any change in policy intentions. However, later she said that there could be six months between the end of QE3 and the first rate hike. This interpretation of ‘considerable time’ only reinforced the market’s perception”.
“Note that this would put the first rate hike by mid-2015. However, for now we stick to our 2015Q4 forecast”.
“The FOMC has been too optimistic about the economic outlook and its next policy steps time and time again. The most recent example being the tapering process”.
“In fact, according to the time table that Bernanke presented after the June 2013 meeting, QE3 should be terminated by mid-2014. However, at the current pace of tapering, QE3 will stop by the end of 2014. Sounds familiar?”
Key Quotes:
“This hawkish shift pushed up the 10y US treasury yield, and made the S&P500 and the EUR/USD take a step back. During the Q&A at the press conference Yellen said that we should not look at the ‘dot plot’ because the dots will fluctuate, but that the FOMC statement was the primary means of communication. And the statement said that the change in forward guidance does not indicate any change in policy intentions. However, later she said that there could be six months between the end of QE3 and the first rate hike. This interpretation of ‘considerable time’ only reinforced the market’s perception”.
“Note that this would put the first rate hike by mid-2015. However, for now we stick to our 2015Q4 forecast”.
“The FOMC has been too optimistic about the economic outlook and its next policy steps time and time again. The most recent example being the tapering process”.
“In fact, according to the time table that Bernanke presented after the June 2013 meeting, QE3 should be terminated by mid-2014. However, at the current pace of tapering, QE3 will stop by the end of 2014. Sounds familiar?”