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15 Dec 2014
Downside risks to US inflation increasing - Rabobank
FXStreet (Guatemala) - Analysts at Rabobank noted the FOMC this week and possible outcomes in respect of forward guidance.
“While strong employment growth has brought the Fed closer to the ‘full employment’ side of its dual mandate, the downside risks to the inflation outlook have increased”.
“Removing the ‘considerable time’ phrase from the FOMC statement would therefore suggest that the FOMC is attaching less weight to the ‘price stability’ side of its dual mandate”.
“What’s more, the addition of data dependency to the ‘considerable time’ phrase in the previous FOMC statement has decreased the urgency to adapt the Fed’s forward guidance in response to November’s strong Employment Report”.
“Therefore, we expect the FOMC to keep ‘considerable time’ in the statement, and to acknowledge the progress in the labor market and the economic recovery through the economic assessment in the statement and the economic projections”.
“However, it is a close call and we do not expect ‘considerable time’ to survive many more meetings. If it is dropped, the most likely replacement is that the FOMC will be ‘patient’ in removing accommodation”.
“While strong employment growth has brought the Fed closer to the ‘full employment’ side of its dual mandate, the downside risks to the inflation outlook have increased”.
“Removing the ‘considerable time’ phrase from the FOMC statement would therefore suggest that the FOMC is attaching less weight to the ‘price stability’ side of its dual mandate”.
“What’s more, the addition of data dependency to the ‘considerable time’ phrase in the previous FOMC statement has decreased the urgency to adapt the Fed’s forward guidance in response to November’s strong Employment Report”.
“Therefore, we expect the FOMC to keep ‘considerable time’ in the statement, and to acknowledge the progress in the labor market and the economic recovery through the economic assessment in the statement and the economic projections”.
“However, it is a close call and we do not expect ‘considerable time’ to survive many more meetings. If it is dropped, the most likely replacement is that the FOMC will be ‘patient’ in removing accommodation”.