FYI | Jun 21 2016
Download related file: StLouis_Fed_Regime-Switching-Forecasts-17June2016
"The Federal Reserve Bank of St. Louis is changing its characterization of the U.S. macroeconomic and monetary policy outlook. An older narrative that the Bank has been using since the financial crisis ended has now likely outlived its usefulness, and so it is being replaced by a new narrative."
That "new narrative" led one time dedicated hawk among FOMC members, St Louis Fed president James Bullard, to surprise Wall Street in an apparent complete change of monetary policy view last week. At the beginning of 2016 the Fed was suggesting four more incremental rate hikes in the year following the December 2015 hike, although the market was not fully convinced. As late as last month the market had at least positioned itself for an expected hike come June or July, but then suddenly the Fed has changed its tune.
Only one rate hike is now expected, although the market is still not convinced. James Bullard believes there will be a rate hike but he has also suggested that will be all — all the way through to 2018.
In the attached document, Bullard explains why the Fed now needs to see the world differently.
Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" – Warning this story contains unashamedly positive feedback on the service provided.
