Fed: Options opens for September - Lloyds

Analysts from Lloyds Bank see that yesterday the Federal Reserve left options open for the next meeting, after showing a more hawkish statement than expected.

Key Quotes:

“As widely expected, the Fed decided to keep policy unchanged today. The accompanying statement, however, was slightly more hawkish. If, as we forecast, economic data continue to improve over the next couple of months, a September interest rate hike remains a significant possibility.”

“Given the uncertain international environment, the Fed’s decision to keep policy unchanged today came as no surprise. Of more interest was whether the FOMC would make any material changes to its policy guidance. On balance it chose not to do so. While the tone of the statement remained consistent with the need to tighten policy, there was no strong signal of when this was likely to occur.”

“We suspect the Committee is leaving its options open while it awaits upcoming data, including Friday’s Q2 GDP release and next week’s July employment report.”

“The next key event may be Fed Chair Yellen’s speech at the Jackson Hole symposium on 26th August. That will give her a further opportunity to reaffirm the outlook for Fed policy and, if circumstances warrant, some indication of the Committee’s intentions for its next meeting.”