The Fed said its word and it was dovish: no hike, lower expectations for rates and global worries. Fed Chair Janet Yellen met the press to explain the considerations, talked about the global economy and the next meetings. The message is quite balanced: on one hand, international developments and a stronger dollar weigh and more confidence is needed. On the other hand, the effects are transitory, employment is improving and it’s the key and a rate hike is coming in 2015.
Here is the live blog of the press conference, where we hear more about the arguments for the decision and a hint for the future.
Highlights
- International developments weigh on inflation.
- Dollar appreciation is watched closely.
- Discussed a rate hike but decided to wait because of developments
- Bigger picture hasn’t changed.
- Rates still expected to rise this year.
- The importance of the first move should not be overstated
- Higher dollar delays the moving away of the low oil impact
- October is still a possibility
- On negative rates: It’s not something we talked about today.
Live Blog
- 18:20 GMT Press conference begins at 18:30. All times are GMT.
- 18:21 The USD is suffering
- 18:22 The only thing Yellen can give bulls is a presser in October.
- 18:24 A press conference in October means that a rate hike is possible within 6 weeks, and this changes the picture.
- 18:27 Yellen usually avoids tough questions
- 18:30 Presser begins
- 18:31 Employment is good, inflation not so good.
- 18:31 International developments weigh on inflation.
- 18:32 The Fed awaits more improvements on all fronts.
- 18:32 The importance of the first move should not be overstated. Monetary policy remains loose.
- 18:33 US GDP has grown better than expected in June.
- 18:33 Less oil drilling because of prices
- 18:34 Moderate GDP growth further ahead.
- 18:34 Employment is improving. They have averaged 222K
- 18:34 Still cyclical weakness.
- 18:35 The participation rate is below the trend, and part time employment remains elevated, involuntary.
- 18:36 Stronger dollar means impact of oil means that the transitory nature will take more time to move away.
- 18:36 Oil effect is still transitory.
- 18:36 Inflation to move gradually to the objective.
- 18:37 We have published a median (to make things easier).
- 18:37 Median growth is 2.1% and 2.3% in 2016
- 8:37 Inflation to be very low this year.
- 18:38 When transitory factors move away, we will have higher inflation.
- 18:39 Abroad, there are concerns about China triggered notable volatility.
- 18:40 Lower dollar, stock market moves have lowered projections
- 18:40 Situation abroad bears close watching.
- 18:4o We discussed a rate hike but decided to wait because of recent developments.
- 18:41 Does not want to overstate the recent developments, the economy looks good.
- 18:42 Decision does not hinge on day to day market moves nor on a single figure.
- 18:43 Some members want a hike this year, but 4 do not
- 18:43 Yellen reads the projections.
- 18:44 Forecasts are conditional on participants’ outlooks
- 18:45 Fed ready to alter policy according to developments, either up or down.
- 18:46 Questions begin
- 18:46 Great majority see a hike this year, emphasizes Yellen.
- 18:47 Dollar and oil price impact are both transitory.
- 18:47 Waiting for further developments, including more labor market improving that will convince us that inflation will rise.
- 18:48 Every meeting is a live meeting, and we will call a presser if necessary.
- 18:48 October is a possibility
- 18:49 A further improvement in the labor market will serve to do that.
- 18:50 Value the opinions of many groups.
- 18;51 The unemployment rate understates the real situation, but we are getting closer.
- 18:51 Will not wait until both mandates are met before hiking.
- 18:52 Recent developments put downward pressure on inflation
- 18:53 Declines in imports because of the dollar and oil prices weigh on inflation.
- 18:54 We expect inflation to move to 2%
- 18:54 We have seen further USD appreciation and further falls in oil, but we still see it as transitory.
- 18:55 This is a small thing.
- 18:55 A tighter labor market has historically generated inflation.
- 18:59 Monetary policy accommodation is immense.
- 19:02 We don’t want to overshoot.
- 19:03 We reviewed developments in various places, but focused on China and other emerging markets. There were no surprises there, but we check if there is a risk of a more abrupt slowdown.
- 19:04 Developments in financial markets in August showed the downside risks in China.
- 19:05 A lot of our focus has been on China, but emerging markets more in general.
- 19:06 Regarding financial markets, we don’t want to respond to the ups and downs of markets. It is not our policy to do so. When there are big financial developments, it is incumbent on us to follow them.
- 19:10 0% rates forever is an extreme scenario.
- 19:11 A negative interest rate was not really discussed, but one member wants additional stimulus. Was it Kocherlakota.
- 19:12 On negative rates: It’s not something we talked about today.
- 19:13 I speak on behalf of the committee and we don’t identify who’s who.
- 19:20 The Fed has a dual mandate.
- 19:24 Government shutdown was not an issue.
- 19:26 We discussed the re-investment policy.
- 19:26 We’ve not given a fixed amount of time for changing the re-investment policy.
- 19:27 Press conference ends.
More:
- EUR/USD higher on the Fed, also boosted on worries about the next Fed move
- AUD/USD extends V-shaped recovery on Fed decision but runs out of steam
Fed decision in September – all the updates
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