Fed tightening cycle will be the most dovish series of hikes in history
|When do you expect the Fed next interest rate hike?
December 2016
Which will be the interest rate level where the Fed will stop hiking at?
2.0%
Do you expect an acceleration in the rate hike pace in the upcoming months?
No I expect the rate hikes to be slow and steady. 25/50 basis points per year.
What’s the Fed looking more closely when deciding their monetary policy: employment figures or inflation levels?
Unemployment is there or thereabouts at full employment levels so they will be watching the inflation data. If they really were interested in unemployment they would have hiked again already.
Can the Fed sustain a tightening cycle when all the other major central banks are on an easing one?
They can, as long as it is extremely shallow, it will be the most dovish series of hikes in history.
Do you think inflation can be a problem in the long-term if the Fed doesn’t “normalize” its policy soon?
Inflation will not be a problem in the world economy for a while due to slack and the lack of demand. Bond markets certainly are not pricing for any realistic threat of inflation.
Is a return of QE policy something to consider in the mid-to-long term?
Never say never for more QE. The whole point of normalisation of rates would be to have enough bullets to tackle the next financial crisis. The Fed will have viewed its use of QE as being relatively successful and as long as the move comes from a reasonably “normalised” position (preferably also having been able to unwind the QE of 2008/2014 then they will certainly keep the option open in the future.
*This is one of the 31 answers to the FXSurvey. You can read the full results of the survey here.
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