Wednesday, September 16, 2015

US: Market awaits the Fed, hawkish tone in play - BBH

FXStreet (Delhi) – Research Team at BBH, expect the Fed statement to be hawkish even if it does not hike rates this week, suggesting a rate hike has been delayed, but that it is still forthcoming. As Fed officials have noted, and we concur, raising the Fed funds target to 25-50 bp, given the current economic conditions cannot fairly be considered tight monetary policy.

Key Quotes

“Since the middle of 2009, when the financial crisis-induced economic contraction ended, the US has created 11.3 mln jobs. That includes the loss of about 500,000 government positions. The US economy is larger than ever before.”

“The budget deficit that peaked at over 10% of GDP is now less than 3%, with only mild austerity--many fiscal support measures were temporary, and rolled off, while others were counter-cyclical stabilizer, like unemployment compensation, that are less needed as growth returned.”

“The different policy responses to the crisis generated different economic outcomes, and it is this divergence that is the chief characteristic of the investment climate. By the Fed's own calculations, the unemployment rate is at levels that are considered full.”

“US economic growth has become somewhat more volatile and lower than in past cycles, but when allowances are made for the collapse of investment in the oil sector, Q2 US growth was the strongest in nearly a decade.”
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