Fed: No stepping back – Rabobank

Analysts at Rabobank note that the Fed speakers yesterday gave little indication the FOMC is any closer to stepping back from its hawkishness.

Key Quotes

“Vice-Chair Clarida restated support for gradual rate hikes ahead, Bostic noted there are “pockets of distress” but many cities are booming; and Evans talked about growing skilled-labour shortages.”

“Only Bullard mentioned possible “cracks” in the economy as the “main challenge for the Fed going forward,” and that he expects the economy to slow in 2019 and 2020. However, President Trump has his own view: “I’m doing deals and I’m not being accommodated by the Fed,” he says in an interview with the Washington Post. “They’re making a mistake because I have a gut and my gut tells me more sometimes than anybody else’s brain can ever tell me.” Trump also weighed in on Fed Chair Jerome Powell: "So far, I’m not even a little bit happy with my selection of Jay. Not even a little bit. And I’m not blaming anybody, but I’m just telling you I think that the Fed is way off-base with what they’re doing.” In that case the president’s gut is the same as the US yield curve and the Fed Funds futures strip, both of which agree the Fed is close to making a mistake. Might that take some of the wind out of the USD sails, even as the trade front argues for it to soar?”