Since the strong retail sales data last Friday, the Fed has clearly started a communication campaign to urge markets to price in a hike in June, even though markets have not gone there yet, they set (Fed Chair Janet) Yellen's speech on June 6, just after the next payroll data and just before the blackout period will start before the next policy meeting. They wouldn't have to do this if they have no plan to raise rates in June.

Tomoaki Shishido

Categorized in : Business

I think the Fed will clearly indicate that a rate cut in December... by Tomoaki Shishido

I think the Fed will clearly indicate that a rate cut in December is not its main scenario.

Tomoaki Shishido

The word 'patient' is used often when the Fed's policy direction is still tightening but its next rate hike can wait for a considerable time. So risk assets now enjoy support from what we can call Powell put.

Tomoaki Shishido

Recent data suggests the U.S. economy is very strong, hardly slowing down in Jan-Mar. The world economy slowed in that quarter but it appears to be rebounding. And recent rises in oil prices are likely to lift inflation expectations further, we expect more selling until the next Fed's meeting in June.

Tomoaki Shishido

Even dovish policy makers such as (Boston Fed President Eric) Rosengren are saying markets expectations are too low. And it is not hard to imagine many at the Fed feels current market rates are too low, so the Fed may try to urge markets to price in higher rates. On balance, we are more likely to have a hawkish surprise than a dovish surprise.

Tomoaki Shishido

One hypothesis the labour data is putting forward is that employment may now be growing at a pace of almost 300,000 even after the dollar has strengthened considerably. That is clearly above the speed limit, if this continues while labour participation does not increase, the jobless rate will fall to around 4.5 percent by the end of year and the Fed risks falling behind the curve in keeping inflation in check.

Tomoaki Shishido

One hypothesis the labor data is putting forward is that employment may now be growing at a pace of almost 300,000 even after the dollar has strengthened considerably. That is clearly above the speed limit, if this continues while labor participation does not increase, the jobless rate will fall to around 4.5 percent by the end of year and the Fed risks falling behind the curve in keeping inflation in check.

Tomoaki Shishido