FOMC: Another step towards a December hike - SocGen

Omair Sharif, Research Analyst at Societe Generale, suggests that the outcome of the September FOMC meeting was in line with their expectations, as the Committee reintroduced the balance of risks statement, removed a rate hike this year and in 2017, and cut the longer-run nominal neutral funds rate.

Key Quotes

“In our view, the reintroduction of the balance of the risks statement was a way to bridge the divide between the hawks and doves on the Committee, and it took the Fed a step further towards raising the funds rate in December.

With respect to assessment of current economic conditions, the statement was relatively bullish despite the recent weakness in both ISM surveys, and a tepid retail sales figure for August. The labor market was described in rosy terms, with the statement noting that “the labor market has continued to strengthen...” and that job gains “have been solid, on average.” Yellen herself noted in the opening remarks to her press conference that payrolls averaged about 180,000 the last four months, a pace that she said was “well above the pace that we estimate is needed to provide work for new entrants into the job market.”