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In view of analysts at Danske Bank, the FOMC minutes left little doubt that we should expect a December rate hike, indicating that another interest rate hike would be warranted fairly soon.

Key Quotes

“More importantly, the FOMC minutes also said that meeting participants emphasised ‘that the stance of policy should be importantly guided by incoming data and their implications for the economic outlook [and that]monetary policy was not on a pre-set course’. The overall impression is similar to that after Powell yesterday, i.e. that the FOMC has become slightly more data dependent and that a change in language is the next step.   However, given our view on the US economy, we see no reason to change our call for two more rates hikes in H1 and possibly a third hike in H2 on top of the widely expected hike this December.”

“Finally, Powell noted the upward trend in the effective Fed funds rate relative to the IOER rate and suggested that ‘fairly soon’ might be appropriate to implement another technical adjustment in the rate relative to the top of the target range for the federal funds rate.”

“The FOMC also discussed a more fundamental change of the policy framework including moving away from targeting the federal funds rate to, e.g. the OBFR (Overnight Bank Funding Rate), which would be more appropriate in a situation with abundant excess reserves.”