16 Dec 2015
FOMC Preview: Liftoff Finally? – UOB
FXStreet (Delhi) – Research Team at UOB, suggests that for the US Fed, the December rate hike is in sight with expectations for a slow and gradual trajectory ahead.
Key Quotes
“After quite a few false dawns of expecting interest rate hikes throughout the last 14 months (since the conclusion of the unconventional quantitative easing program in Oct 2014), the market is “sensing” that the Fed is finally on the cusp of normalizing the Fed Funds Target Rate (FFTR).”
“We are expecting the Fed’s rate liftoff to take place in the 15/16 December 2015 FOMC which is also the market consensus while according to trading in futures and options data compiled by Bloomberg, the probability of a Fed liftoff by December peaked at 78% (on 7-9 Dec) before easing lower to 74% on 11 Dec (from 66% on 16 Nov). Recall that the US Federal Reserve started cutting its benchmark policy interest rate, the Fed Funds Target Rate (FFTR), first on 18 Sep 2007, by an initial 0.5% cut to 4.75%, and by the time we reached the 10th rate cut on 16 Dec 2008, it was lowered by a final 0.5%, to between 0% and 0.25% where it has remained ever since. Thus, this rate liftoff (if and when it happens) is definitely history in the making after nearly a decade.”
Key Quotes
“After quite a few false dawns of expecting interest rate hikes throughout the last 14 months (since the conclusion of the unconventional quantitative easing program in Oct 2014), the market is “sensing” that the Fed is finally on the cusp of normalizing the Fed Funds Target Rate (FFTR).”
“We are expecting the Fed’s rate liftoff to take place in the 15/16 December 2015 FOMC which is also the market consensus while according to trading in futures and options data compiled by Bloomberg, the probability of a Fed liftoff by December peaked at 78% (on 7-9 Dec) before easing lower to 74% on 11 Dec (from 66% on 16 Nov). Recall that the US Federal Reserve started cutting its benchmark policy interest rate, the Fed Funds Target Rate (FFTR), first on 18 Sep 2007, by an initial 0.5% cut to 4.75%, and by the time we reached the 10th rate cut on 16 Dec 2008, it was lowered by a final 0.5%, to between 0% and 0.25% where it has remained ever since. Thus, this rate liftoff (if and when it happens) is definitely history in the making after nearly a decade.”