Back
31 Jul 2015
FOMC: Why should we not raise rates? - BTMU
FXStreet (Guatemala) - Derek Halpenny, analyst at The Bank of Tokyo Mitsubishi UFJ explained that the FOMC intentionally is maintaining the degree of flexibility required in these uncertain times.
Key Quotes:
"A rate hike in September is still a possibility in the wake of this FOMC statement, which would of course reinforce our view of EUR/USD falling to parity or below by the end of the year. Our sense now on the FOMC is that they see less and less reason to justify the current emergency level of zero interest rates."
"The Fed is slowly shifting from posing the question of ‘why should we raise the key policy rate?’ to ‘why should we not now raise the key policy rate?’ Based on current market conditions, the one risk that may offer the reason not to raise the key policy rate is concerns over too low inflation given the renewed commodity price decline."
"However, even in the scenario of a Fed delay there would still be reasons to argue that EUR/USD would move lower, albeit by a lesser degree than we are currently forecasting."
Key Quotes:
"A rate hike in September is still a possibility in the wake of this FOMC statement, which would of course reinforce our view of EUR/USD falling to parity or below by the end of the year. Our sense now on the FOMC is that they see less and less reason to justify the current emergency level of zero interest rates."
"The Fed is slowly shifting from posing the question of ‘why should we raise the key policy rate?’ to ‘why should we not now raise the key policy rate?’ Based on current market conditions, the one risk that may offer the reason not to raise the key policy rate is concerns over too low inflation given the renewed commodity price decline."
"However, even in the scenario of a Fed delay there would still be reasons to argue that EUR/USD would move lower, albeit by a lesser degree than we are currently forecasting."