Fed policy is hardly “modestly accommodative” - MUFG

Derek Halpenny, European Head of GMR at MUFG, notes that the Fed’s press conference was more mixed as the Yellen spent most of her time dodging questions about Trump and the election but did stress that the meeting ending 2nd November was “live” and politics would not play a role in any decision.

Key Quotes

“We are dubious of that of course and believe only following very strong, unambiguous economic data would there be any chance of a November rate hike. December is our call at this stage.

Finally, we were very surprised to hear Yellen describe the monetary stance as “modestly accommodative”. That of course is consistent with the lowering of growth projections and the long-run fed funds rate to 2.875% but the current stance is surely looser than “modestly accommodative”. An aggressive view of the neutral real fed funds rate would be zero percent – the current real fed funds is -1.2%; that’s more than “modestly accommodative”.”