Sonia Meskin, US economist at Standard Chartered, suggests that they do not expect substantive changes to Fed’s recent outlook after the January meeting as the Fed officials have emphasised patience in recent months, and expectations of a March hike are now low among investors and forecasters.
Key Quotes
“Simply put, we expect the Fed’s ‘data dependence’ to come down to momentum in business investment on the one hand and employment on the other. We believe financial conditions and global growth concerns will continue to play a role via their impact on investment and employment.”
“Both business investment and the labour market are gauges of cyclical momentum in the economy. Business investment correlates with sentiment and corporate profits over time, and these can be threatened by growth concerns or fiscal uncertainty. Historically, however, US business investment has exhibited a stronger correlation with profits that are domestically than globally generated. If this relationship holds in 2019, the stock market fears of late 2018 may prove overdone, and the Fed could be emboldened to hike again. The labour market is another key gauge of capacity constraints across the economy against a background of benign inflation.”
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