Daily Insight Fed rate hike this year
Group Economics Macro & Financial Markets Research Maritza Cabezas & Georgette Boele +31 20 343 5618 ,
18 June 2015 • • •
FOMC to hike rate this year, likely in September The “dot plot” with FOMC rate hike expectations shows more gradual pace of rate hikes thereafter Markets further scale back rate hike expectations
FOMC statement more optimistic, but cautious
Markets further scale back rate hike expectations
After two days of meetings, the FOMC statement showed a
Ahead of the Fed the Fed funds for December 2015 were
positive, but cautious tone on the economy. Fed policymakers
around 0.365% and 1.19% for the end of 2016. Afterwards
signalled that the economy is “expanding moderately after
they moved respectively 5 and 9 bp lower. Right after the
changing little in the first quarter” as “job gains picked up”. The
decision, the US dollar moved higher but fell under heavy
statement also signalled the improvement in the housing
pressure afterwards. The 10y US Treasury yields also moved
market, while the inflation language was unchanged.
around 8 bp lower. US equity markets gained somewhat. These reactions reflect that the market is not confident about
FOMC economic forecasts: improvement after slowdown
Fed rate hikes. We expect markets to scale up rate hike
The Summary of Economic Forecasts, suggests that the weak
expectations in coming months, as it becomes clear that the
first quarter growth has led the Fed to lower its GDP
Fed will hike in September. This should support the dollar.
predictions for 2015 to 1.8% to 2% from 2.3% to 2.7% projected in March. The economy, however, is expected to
FOMC individual rate projections
pick up in the coming quarters. The unemployment rate
rate %
forecasts for 2015 are thought to be a bit higher than in March
midpoint of target range level for the federal funds rate
4.5
•
at 5.2% to 5.3% up from 5% to 5.2%. Chair Yellen mentioned during the press conference that a slight increase in productivity growth would support a somewhat slower pace of
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4
•• •• •• •
job gains in the coming time, leading to a bit higher unemployment. Inflation forecasts were broadly unchanged. Rate hike this year, but divided on pace of hikes thereafter
••• • 3
line with our view, but they have become more cautious on the
off in September, we expect two rate hikes, given that we see a stronger acceleration of the economy in the second half of the year.
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••• 1.5
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•••••
•
••••• 0.5
•••••
December, while in March there were more officials expecting a half percentage point increase in 2015. Starting with the lift
•••
•
pace of rate hikes thereafter. Participants have moved towards one or two quarter percentage point rate increases by
•
•
2
FOMC participants expect the lift off this year. The median continues to coincide with a rate hike in September which is in
••
2.5
The “dot plot” which forecasts participants views on the appropriate pace of interest rate normalisation shows that
•••••• •••••
3.5
•
•• 0 2015
Red dots indicate median Source: Federal Reserve
2016
2017
Longer run
2
Fed rate hike this year – 17 June 2015
Financial markets Currency markets
Close
Change 1 day
Change 5 days
Change YTD
EUR/USD USD/JPY
1.1334
0.6125
0.8363
123.45
-0.6199
-0.1537
3.0123
AUD/USD
0.7750
1.0826
0.2847
-5.0827
USD/CHF
0.9220
-0.4750
-1.5273
-7.2341
NZD/USD
0.6984
0.9978
-0.1430
-10.4041
GBP/USD
1.5828
0.6806
2.1557
1.5853
USD/SGD
1.3360
-0.8755
-0.8755
0.8606
USD/CAD
Bond markets
1.2235
Close
-0.6577
Change 1 day
-0.7061
Change 5 days
-6.3306
5.3379
Change YTD
2-year German Govt Bond yield
-0.1950
0.0000
-0.0310
-0.0970
10-year German Govt Bond yield
0.8080
0.0100
-0.1730
0.2670
Yield curve Germany
1.0030
0.0100
-0.1420
0.3640
2-year US Treasury Bond yield
0.6532
-0.0323
-0.0718
-0.0113
10-year US Treasury Bond yield
2.3183
0.0090
-0.1655
0.1471
Yield curve US
1.6651
0.0413
-0.0937
0.1584
US 2-year sw ap rate
0.9150
-0.0715
-0.0755
0.0207
US 10-year sw ap rate
2.3989
-0.0651
-0.1028
0.1128
US sw ap curve
1.4839
0.0064
-0.0273
0.0921
EU 2-year sw ap rate
0.1543
-0.0007
0.0093
-0.0207
EU 10-year sw ap rate
1.1430
-0.0181
-0.0568
0.3310
EU sw ap curve
0.9887
-0.0174
-0.0661
0.3517
-0.0140
0.0000
0.0000
-0.0920
0.2863
0.0030
0.0008
0.0307
6.7900
15.6100
16.8600
Euribor 3 Month ACT/360 ICE LIBOR USD 3 Month JPMorgan EMBI Plus Sovereign S
404.3000
Equity markets
Close
Change 1 day % Change 5 days %Change YTD%
Nikkei 225
20,219
-0.19
Hang Seng Index
26,754
Hang Seng China Enterprises Index
13,415
Australian Stock Exchange S&P/ASX 200 Index Singapore Straits Times Index
0.86
15.86
0.70
0.25
13.34
1.22
-1.48
11.93
5,595
1.08
2.13
3.41
3,326
0.84
0.00
-1.17
Euro Stoxx 50 Index
3,429
-0.73
-2.77
8.97
S&P 500 Index
2,100
0.20
-0.23
2.02
MSCI World Daily Total Return Gross USD
800
0.28
0.60
4.26
AEX Index
472
-0.76
-2.05
11.09
-2.09
9.68
-24.48
Chicago Board Options Exchange Volatility Index
Commodity markets Reuters/Jefferies CRB Total Return Gold spot USD/Oz Generic first NYMEX Crude Light future Generic first Brent Crude Oil future LME Copper 3 Months Rolling Forw ard Generic first Wheat future Chicago Board of Trade Source Bloomberg
15
Close
Change 1 day % Change 5 days %Change YTD%
224
0.55
-1.93
-2.68
1,186
0.30
-0.05
0.07
60
-0.08
-2.46
12.48
64
-0.09
-3.14
11.01
5,745
-0.09
-4.73
-8.81
491
0.51
-4.33
-16.70
3
Fed rate hike this year – 17 June 2015
Day
Date
Time
Country
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
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
Wednesday Wednesday Wednesday Wednesday Wednesday
17/06/2015 17/06/2015 17/06/2015 17/06/2015 17/06/2015
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
Friday
19/06/2015
Key Economic Indicators and Events
Period
Latest outcome
Consensus
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
-2.7 12.5 3.1 -0.3
-2.5 11.5 4.9 0.2
54.0 -2
55.0 -2
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 42 20.2
0.7
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
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
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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