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Analysts at Deutsche Bank suggest that the slightly dovish Fed minutes indicated that a further rate hike should be expected in June but that the Committee is not in a rush to clearly signal a more hawkish trajectory at this juncture.

Key Quotes

“In the details, the minutes noted that “most participants judged that”¦.it would likely soon be appropriate”¦to take another step in removing policy accommodation”. On balance, the minutes didn’t seemed to be too concerned about an overheating economy and inflation over shooting. It noted that a temporary period of inflation “modestly above 2% would be consistent with the committee’s symmetric inflation objective”¦” and that “it was premature to conclude that inflation would remain at levels around 2%….”

“On the labour market, the minutes noted the Employment cost index for 1Q indicated the strength in the labour market was “”¦showing through to a gradual pickup in wage increases, although the signal from other wage measures was less clear.” while many participants commented that overall wage pressures were still moderate or were strong only in industries and occupations”¦” Overall, given our economists’ expectations for the ongoing tightening of the labour market, they still expect three more hikes this year.”