You are here
Fed blinks, June rate hike unlikely: Rabobank
THE US Federal Reserve - while opening the door to the chances of an interest-rate hike in June - is unlikely to "pull the trigger" given deflationary pressures and the strong US dollar, Rabobank Financial Markets Research said on Thursday.
"The word 'patient' was removed and the door officially opened to a potential rate hike as soon as June - that was the 'wink'," it said in a report.
But for most of the year, the economy will continue to be in deflation, meaning that the development of core inflation and inflation expectations will be crucial in convincing the Federal Open Market Committee (FOMC) that inflation will over time return to its 2 per cent target, it noted.
"The appreciation of the US dollar since last summer is increasingly having a negative impact on US exporters, amplifying the effects of weak global demand for US goods and services."
This indicates that the Fed is no longer patient, but not yet reasonably confident at this point, it added. "For an FOMC apparently champing at the bit to hike rates in its public statement, that looks like a clear 'blink' to me," the report said.