Rob Carnell, Chief International Economist at ING point out that Yellen increase the case for another rate hike in his Jackson Hole speech, but that, does not mean that a rate hike is likely.
Key Quotes:
“She adds plenty of caveats and a September rate hike remains awkward to sell to markets unless the inflation data start to move higher.”
“Janet Yellen's lengthy speech at Jackson Hole contained two main messages, and one sub-message. The first of the main messages was that the economy has continued to improve and that made the case for a rate hike more likely in the months ahead. “
“But "more likely" does not mean "likely", and markets are still reluctant to buy into a September rate hike story, at least without more information on the evolution of jobs growth, the pace of economic activity, or higher inflation.”
“The second message, which we suspect markets may also have problems accepting at face value, is that in the event of a return to crisis, more quantitative easing, coupled with "forward guidance" would likely provide sufficient stimulus to avert catastrophe (our words). This message might very well be filed under the heading of "Well, they would say that wouldn't they."”
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