US: Market still thinks the Fed will drag its heels - AmpGFX

Greg Gibbs, Director at Amplifying Global FX Capital, suggests that the fact that the Fed appears ready to follow up its December hike so soon (three months later) suggests it is more serious this time, and might at least stay on its previous projection of three hikes this year.

Key Quotes

“In her speech on 3 March, Fed Chair Yellen said, “Unless unanticipated developments adversely affect the economic outlook, the process of scaling back accommodation likely will not be as slow as it was during the past couple of years.”

“This does suggest Yellen is more confident that there will be more hikes this year after March, but it still leaves the bar pretty low when the Fed was on an extraordinarily slow one hike per year pace in 2015 and 2016.”

“The market is still biased to think the Fed is more likely to pause and leave rates steady than it is to speed-up, even though the Fed has essentially just sped up.”

“The market either does not believe the Fed will raise its projection for rate hikes, and/or, continues to think the Fed has a bias to fall behind its own rate forecasts.”