Analyse fra BNP Paribas
The July FOMC minutes severely damaged the chances of rate lift-off in September.
The Committee is increasingly convinced that the labour market is near or very close to where it needs to be to justify liftoff, but not confident on the inflation outlook
The subsequent Chinese devaluation and weak commodity prices will not have helped the Committee’s confidence in their inflation outlook.
The minutes reinforce our own confidence in a December rate hike, with September looking a long shot with only a 10% to 20% chance.
The Fed’s discussion of reinvestment policy in July supports our long-held view that it will be sensible to smooth out the balance sheet run-off. The July minutes sharply reduced the chances of an inaugural hike in September, to only about 10% to 20% in our view.
The key reason is that while most of the Committee feels the economy is either already at maximum employment or will reach that shortly if its forecasts are realized, there is much less agreement about feeling reasonably confident that inflation will move back to its 2% target over the medium term. Some/several on the Committee are really quite uncertain about inflation, with expressed doubts about a pick up centering on three things:
I. The lack of convincing signs of accelerating wages II. Limited impact of tighter resource utilization on inflation III. Downside risks from weaker commodity prices and possible further dollar appreciation.
