Fed turns the screw – Investec

Research Team at Investec, notes that the FOMC minutes revealed a very hawkish meeting which keeps a June or July hike firmly on the table.

Key Quotes

“The main takeaways were the slowdown in domestic spending would be temporary and financial conditions improved which would provide support for aggregate demand going forward. ‘A couple’ of participants thought that given reduced downside risks and convergence to mandate that postponement risked credibility: proceeding too slowly now risked aggressive hikes later.

But perhaps most significantly “most participants judged that if incoming data were consistent with economic growth picking up in the second quarter” then it “likely would be appropriate for the Committee to increase the target range for the federal funds rate in June”. It’s worth noting that these are the views of the FOMC participants on April 27, and we have had more positive data since then.”