Some doves are for turning”¦ but not Bullard – ABN AMRO

“St Louis Fed President Bullard continued to strike a relatively dovish tone in remarks made today,” points out ABN Amro Senior Economist Bill Diviney.

Key quotes

“While acknowledging the present strength in the US economy, he repeated his view that ‘we are close to neutral’ and that ‘we don’t have to be projecting planned rate hikes at this point’, but preferred instead a more data-dependent approach from here on. With that said, he sounded comforted by the recent re-steepening in the yield curve, saying ‘that’s probably welcome from my perspective’ and that a healthy level would be closer to 70bp (as of Friday’s market close, the 2s10s are c.34bp).”

“These comments come in contrast to those of Atlanta Fed president Bostic – a more moderate dove – who last Friday signalled a more meaningful shift in his policy views. Most strikingly, he said ‘the central question in my mind is whether the apparent strength in GDP and job growth is a signal that I have materially underestimated the underlying momentum of aggregate demand,’ and that if that were the case, ‘the potential for overheating would require a higher path for rates than what I had been thinking’. Indeed, earlier in the year, Bostic – who is a voter on the FOMC this year, but not next – said he expected 2-3 rate hikes in 2018. By December, he is very likely to be voting in favour of a fourth.”