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26 Jan 2015
Fed might delay its rate hike to Q4 2015 – Rabobank
FXStreet (Barcelona) - The Rabobank Research Team comments that disinflation concerns are aggravating in the US, and hence predict that Fed might hike rates in Q4 2015 and not mid-2015.
Key Quotes
“We still think that the US recovery is strong enough to deal with the global headwinds, but disinflation is hitting America even harder than anticipated. This has strengthened our case for a delay in the first Fed rate hike from mid-2015 to 2015Q4.”
“Meanwhile, the ECB’s expansive monetary policy is adding to downward pressure on government bond yields.”
“These factors add to the undercurrents in the market for US treasuries that we highlighted a year ago. The falling budget deficit is leading to decreased net issuance, while there is increased demand of pension funds and banks for US treasuries because of the rising share of retirees and regulation. These undercurrents are exerting downward pressure on US treasury yields, independent of cyclical factors and monetary policies.”
“We expect downward pressures to continue to prevail in the next six months, before rates rebound as we approach the Fed’s first rate hike later in the year.”
Key Quotes
“We still think that the US recovery is strong enough to deal with the global headwinds, but disinflation is hitting America even harder than anticipated. This has strengthened our case for a delay in the first Fed rate hike from mid-2015 to 2015Q4.”
“Meanwhile, the ECB’s expansive monetary policy is adding to downward pressure on government bond yields.”
“These factors add to the undercurrents in the market for US treasuries that we highlighted a year ago. The falling budget deficit is leading to decreased net issuance, while there is increased demand of pension funds and banks for US treasuries because of the rising share of retirees and regulation. These undercurrents are exerting downward pressure on US treasury yields, independent of cyclical factors and monetary policies.”
“We expect downward pressures to continue to prevail in the next six months, before rates rebound as we approach the Fed’s first rate hike later in the year.”