Group Economics
Daily Insight
Macro & Financial Markets Research Maritza Cabezas & Aline Schuiling
Fed preview: Yellen tiptoes to rate hike
+31 20 343 5618 ,
17 June 2015
FOMC statement set to adopt more positive tone on economy… … paving the way for a rate hike in September Economic sentiment in Germany hit by Greece and higher bond yields
More positive tone FOMC statement The FOMC statement on Wednesday will likely adopt a more
After 10 years near zero rates rate hike getting closer
positive tone, reflecting the improvement in the economy,
Federal Funds Rate %
particularly the labour market and consumption in recent reports. Meanwhile, PCE inflation, which is the preferred measure of the Fed has been soft lately. Nonetheless, other inflation measures, including core CPI inflation, have been
20 16 12
slowly picking up. The references to inflation should remain broadly unchanged. Chair Yellen has said that the Fed can hike rates even if inflation is not rising. FOMC forecasts: some downward adjustments As for the FOMC forecasts, GDP growth could be lowered as a result of the weaker first quarter growth. However, forward
8 4 0 72
76
80
85
89
93
98
02
06
11
15
Source: Thomson Reuters Datastream
looking data on the labour market suggest that unemployment could also be adjusted downwards somewhat, while we expect inflation forecasts to be broadly unchanged. The long-term GDP growth forecasts will likely be lowered in line with the
Economic sentiment in Germany hit by Greece and higher bond yields
ongoing weak productivity. We don’t expect major changes in
Germany’s ZEW economic sentiment fell from 41.9 in May to
employment and inflation forecasts in the long term.
31.5 in June. The outcome was well below the consensus forecast of 37. The decline in June followed a 11.4 point drop
Dots will continue to reflect different views
in May, and it is probably related to rising worries about
The discussions on the timing of a rate hike within the Fed,
Greece, which also has hit financial markets. That said, the
however, remain complex. On the one hand, we perceive that
rise in bond yields in recent weeks has also had a downward
Board members (such as Chair Yellen, Vice Chairman Fischer)
impact on sentiment. On balance, a larger share of the
are in favour of a lift-off this year, but some Committee
respondents of the ZEW survey expect German 10y
participants have taken a more dovish tone after the weak first
government bond yields to rise further.
quarter economic data, asking more time for data to confirm the improvement in the economy. This suggests that the broad
ZEW still consistent with ongoing recovery, but
dispersion in the dots will remain broadly unchanged.
emphasised risks
Nevertheless, we think that most participants will continue to
At its current level ZEW sentiment still is above its long-term
support at least one rate hike this year.
average of around 25 and consistent with ongoing growth of the German economy. Still, the drop in sentiment illustrates
Economists expect September, but markets sceptical
that the eurozone economy as a whole is feeling the negative
The FOMC has said that its decision to hike rates is data
effects of the tensions surrounding Greece. Consequently, the
dependent. As a result, the positive data has made economists
ZEW survey emphasises the risks to our scenario of a marked
more confident about a September rate hike. On the other
pick-up in economic growth in the coming quarters.
hand, futures markets are still not fully pricing in such a move. In any case, the Fed has recurrently communicated that it is mindful of the possibility of volatility as markets adjust to a change in policy stance.
2
Fed preview: Yellen tiptoes to rate hike – 17 June 2015
Financial markets Currency markets
Close
Change 1 day
Change 5 days
Change YTD
EUR/USD USD/JPY
1.1242
-0.0533
-0.7241
123.44
0.0649
0.6195
3.0556
AUD/USD
0.7745
-0.0903
-0.2062
-5.2599
USD/CHF
0.9319
-0.0322
0.0429
-6.2758
NZD/USD
0.6982
-0.1002
-3.0547
-10.4527
GBP/USD
1.5639
-0.0575
0.7019
0.3980
USD/SGD
1.3434
0.0819
0.1342
1.3504
USD/CAD
Bond markets
1.2295
Close
0.0000
Change 1 day
0.3264
Change 5 days
-7.0755
5.7998
Change YTD
2-year German Govt Bond yield
-0.1950
-0.0100
-0.0360
-0.0970
10-year German Govt Bond yield
0.7980
-0.0270
-0.1520
0.2570
Yield curve Germany
0.9930
-0.0170
-0.1160
0.3540
2-year US Treasury Bond yield
0.6855
-0.0160
-0.0314
0.0210
10-year US Treasury Bond yield
2.3093
-0.0466
-0.1291
0.1381
Yield curve US
1.6238
-0.0306
-0.0977
0.1171
US 2-year sw ap rates
0.9593
0.0071
-0.0210
0.0650
US 10-year sw ap rates
2.3950
-0.0132
-0.1468
0.1089
US sw ap curve
1.4357
-0.0203
-0.1258
0.0439
EU 2-year sw ap rates
0.1620
-0.0080
0.0100
-0.0130
EU 10-year sw ap rates
1.1503
-0.0047
-0.1377
0.3383
EU sw ap curve
0.9883
0.0033
-0.1477
0.3513
-0.0140
0.0000
-0.0010
-0.0920
Euribor 3 Month ACT/360 ICE LIBOR USD 3 Month
0.2833
-0.0028
0.0011
0.0277
JPMorgan EMBI Plus Sovereign S
404.3000
6.7900
15.6100
16.8600
Equity markets
Close
Change 1 day % Change 5 days %Change YTD%
Nikkei 225
20,258
-0.64
0.80
16.09
Hang Seng Index
26,567
-1.10
-1.57
12.55
Hang Seng China Enterprises Index
13,253
-2.71
-4.39
10.58
Australian Stock Exchange S&P/ASX 200 Index
5,536
-0.05
1.18
2.31
Singapore Straits Times Index
3,298
-0.75
0.09
-1.99
Euro Stoxx 50 Index
3,454
0.47
-0.08
9.78
S&P 500 Index
2,096
0.57
0.78
1.82
MSCI World Daily Total Return Gross USD
800
0.28
0.60
4.26
AEX Index
475
0.48
0.10
11.94
-3.77
2.35
-22.86
Chicago Board Options Exchange Volatility Index
Commodity markets Reuters/Jefferies CRB Total Return Gold spot USD/Oz
15
Close
Change 1 day % Change 5 days %Change YTD%
224
0.55
-1.17
-2.68
1,182
0.02
-0.33
-0.21
Generic first NYMEX Crude Light future
60
0.03
-2.34
12.61
Generic first Brent Crude Oil future
64
-0.39
-1.82
11.11
5,750
-1.12
-3.60
-8.73
489
-0.10
-8.17
-17.13
LME Copper 3 Months Rolling Forw ard Generic first Wheat future Chicago Board of Trade Source Bloomberg
3
Fed preview: Yellen tiptoes to rate hike – 17 June 2015
Day
Date
Time
Country
Key Economic Indicators and Events
Period
Latest outcome
Consensus
Monday Monday Monday Monday Monday Monday Monday
15/06/2015 15/06/2015 15/06/2015 15/06/2015 15/06/2015 15/06/2015 15/06/2015
08:30:00 11:30:00 14:30:00 15:15:00 15:45:00 16:00:00
IN RU US US EC US RU
Wholesale price index - % yoy May Key rate % Jun 15 Empire State PMI - Manuf. general business conditions - index Jun Industrial production - % mom May ECB publishes weekly QE details NAHB home builders' confidence index Jun GDP - % yoy 1Q P
-2.4 11.5 -2.0 -0.2
-2.5 11.5 4.9 0.2
59.0 -2
55.0 -2
Tuesday Tuesday Tuesday Tuesday
16/06/2015 16/06/2015 16/06/2015 16/06/2015
08:00:00 10:30:00 11:00:00 14:30:00
DE GB DE US
CPI - % yoy CPI - % yoy ZEW index (expectation economic growth) Housing starts - % mom
May F May Jun May
0.7 0.1 32 -11.1
0.7
Wednesday Wednesday Wednesday Wednesday Wednesday
17/06/2015 17/06/2015 17/06/2015 17/06/2015 17/06/2015
01:50:00 10:30:00 10:30:00 11:00:00 20:00:00
JP GB GB EC US
Merchandise trade exports - % yoy Claimant count unemployment rate - % Change in claimant count - thousands Core inflation - % yoy Policy rate - %
May May May May F Jun 17
8.0 2.30 -12.6 0.9 0.25
Thursday Thursday Thursday Thursday Thursday Thursday Thursday Thursday Thursday Thursday Thursday Thursday Thursday
18/06/2015 18/06/2015 18/06/2015 18/06/2015 18/06/2015 18/06/2015 18/06/2015 18/06/2015 18/06/2015 18/06/2015 18/06/2015 18/06/2015 18/06/2015
09:30:00 09:30:00 09:30:00 09:30:00 10:00:00 10:30:00 14:30:00 14:30:00 14:30:00 14:30:00 16:00:00 14:30:00
EZ NL CH CH CH NO GB US US US US US US
Eurogroup meeting about Greece Consumer confidence - index SNB 3-month ibor lower target SNB 3-month ibor upper target SNB Sight Deposit Interest rate Policy rate - % Retail sales - % mom Inflation excl food and energy - % mom Inflation excl food and energy - % yoy Inflation (CPI) - % mom Inflation (CPI) - % yoy Philadelphia Fed - business confidence - index Initial jobless claims
Jun Jun 18 Jun 18 Jun 18 Jun 18 May May May May May Jun
2.0 -1.25 -0.25 -0.75 1.3 1.2 0.3 1.8 0.1 -0.2 6.7 279k
Friday
19/06/2015
JP
Policy rate - %
Jun 19
80.0
39 -3.4
ABN AMRO
11.5
56.0
37 -2.5
2.6
0.9 0.25
0.25
-1.25 -0.25 -0.75 1.0
-1.25 -0.25 -0.75
0.2 1.8 0.4 0.0 7.5
0.2 1.8 0.4 0.0
80.0
80.0
Source: Bloomberg, Reuters, ABN AMRO Group Economics (we provide own forecasts only for selected k ey variables and events)
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