Comparison of Sep & Jul Fed Statements

by Ashraf Laidi
Sep 17, 2015 20:48

The Fed kept rates unchanged with an unambiguously dovish statement, focusing on weakening inflation, rising market turbulence and a new reference to foreign developments. The dot forecasts pointed to slower growth and lower core inflation and lower fed funds projections. The only hawkish dissent to the decision was from Richmond Fed's Lacker, but this point was made moot by not only due to Lacker's well documented hawkish stance, but also by the fact that the dot plot showed one Fed member expecting negative rates, even if this member is the widely dovish Minneapolis Fed's Kocherlakota.

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Comparison of Sep & Jul Fed Statements - Fed Comparison Sep 17 (Chart 1)

New way to worry about the world

The most important part of the Fed statement is the following: "Recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term." Still, we expect the Fed to tighten by year-end; we continue to look for the initial rate hike to come in December."

We made the case against a Fed hike since the start of the year and our latest argument was clarified today on here (see final 3 paragraphs):  Subscribers to our Premium trades are sitting on a long EURUSD trade at 1.1210 and long EURCAD.

 

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