Bill Diviney, senior economist at ABN AMRO, notes that the Atlanta Fed President Bostic said today that the ‘next rate move could be up or down’ and would be ‘driven by the data’.
Key Quotes
“While this appears to have weakened the dollar, we think it merely emphasises that Fed policy will be more data dependent from hereon, and we note that in separate remarks on Monday Bostic said that he expects one more rate hike in 2019. Indeed, we believe the tightening bias will be maintained by the Fed (i.e. the dots will likely still show one or two rate hikes on the horizon), and that the bar will be high for the Fed to shift to an easing bias and to start cutting rates.”
“For this, there would have to be a meaningful risk of the US entering a recession. On our forecast horizon – to 2020 – we think this is unlikely. While the investment cycle has likely peaked (as pointed to by the recent dramatic fall in the ISM), and there are risks in corporate debt for instance, private consumption should remain solid, and – the current shutdown notwithstanding – government spending is projected to increase sharply in 2019. These factors should keep growth somewhat above trend over the coming year, offsetting the softening in manufacturing and investment.”
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