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    FOMC: Dot plot to have most notable changes - RBS Sandeep Kanihama

    Research Team at RBS, suggests that the FOMC concludes its June policy meeting today but little action and few changes to the statement are expected given the upcoming Brexit vote and the recent slowdown in payrolls.Key Quotes“The most notable changes will likely be in the Summary of Economic Projections’ “dot plot.”Our economists note that “As Yellen said in her speech on June 6, ’new questions about the economic outlook have been raised by the recent labor market data.’ In the past, when questions about the outlook have been raised (e.g. after China devaluated last August or financial conditions tightened in January/February), it has taken several months for policymakers to feel confident enough to act.”In addition, the Fed’s risk management approach to monetary policy points to ongoing caution. Importantly, while we still see the median 2106 dot at two hikes, we expect a much larger number of members seeking one dot (to be specific, we see as many as 7 members looking for zero or only one rate hike this year). This gives our base case outlook for today a dovish skew, especially as we expect the tone of Yellen’s press conference to mirror her June 6th speech.While our base case leans dovishly, there is a chance the Fed is “accidentally hawkish.” Given current market pricing, an attempt by the Fed to hold course and keep most dots at two hikes, while representing little change from March, could be viewed as hawkish by the markets. Alternatively, the Fed may want to keep the status quo in order to (a) not roil the markets before Brexit and/or (b) save the bullet of an accommodative shift in communication in case it is needed post-Brexit or in a scenario where payrolls remain weak.Lastly, the Fed could be purposely hawkish in order to regain optionality for a July rate hike, though we view this probability as low after Yellen’s June 6th speech and given the upcoming UK vote.”

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