A look at what ANZ expect from the Federal Reserve's FOMC meeting
In summary (bolding is mine):
- The Fed may hike rates for the first time in nearly a decade - an event many in financial markets have not experienced.
- Our base case is that the Fed should proceed with a tightening in what is set to be a close decision
- The US domestic economy seems solid enough to cope with a modest tweak in interest rates from emergency settings
- We also expect the Fed to bring down its projected fed funds rate profile. This could counter any possible volatility a rate hike might cause.
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ANZ also ask ... "What if the Fed doesn't move" (again, bolding is mine)
- Its possible Yellen may indicate that the US economy is ready but that the Fed is holding off due to heightened uncertainty about the international outlook.
- If this is the case, a further stabilisation in financial markets would make October a reasonable proposition.
- There is one development flying under the radar that could undermine such plans and could thwart the Fed from moving this year and possibly early next year.
- The Washington Post reports that the odds of a government shutdown happening in October have risen sharply. Should this happen, the experience of 2013 showed that even if the economic impact may be small, there will be considerable uncertainty over the veracity of the data for a couple of months. This could make things tricky for the data dependent Fed.
