Two Dovish FED Members Yesterday and One Hawkish, While FOMC Minutes Call for Patience
Yesterday we had two FED members and the FOMC minutes call for patience on rate hikes and a third member asking for rates at 3.0%-3.25%.
Yesterday we had the St Louis FED Chairman James Bullard make some dovish remarks for the USD. He said that the rate hikes are enough for now and that the situation now warrants for no further hikes, although the USD ignored him and didn’t move much.
FED’s Evans came out after Bullard saying that the FED should continue to increase interest rates to 3.0%-3.25%. That should have been bullish for the Dollar since it means 4-5 more interest rate increases in a year or so. But again, the USD ignored Evans as well.
Later in the afternoon when the US session started, another FED member gave a bunch of dovish comments which surprisingly had a decent impact and hurt the US Dollar. Here are comments form Bostic:
- No urgency to make policy changes ‘just to run to a number’
- Fed needs to strongly signal that it’s not locked into a trajectory
- Policy could move in either direction
- Open to cut if downside risks all come to bear
- Comfortable ‘hanging out’ near neutral level while the Fed takes stock of how the economy is responding to higher rates
- Hearing from businesses across the board that they have become cautious about 2019
- Evolution of economy should dictate Fed’s next move
Bostic was the second FED member with such comments yesterday. The USD took it on the chin and lost around 100 pips against the Euro as EUR/USD climbed to 1.1540.
Which one of them is right? The FOMC minutes later on in the evening called for more patience from most FED members as my colleague Shain who covers the US session explained in our calendar.
Recent developments, including financial market volatility and concerns about global growth, made the appropriate extent and timing of future policy firming less clear than earlier for the FED. The Buck lost around 20 pips on the minutes but then retraced those losses yesterday before the market closed. So, nothing new to be honest – the market was expecting the FED to get less aggressive with rate hikes and they confirmed it so we are back where we were before the statement.
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