FXStreet (Delhi) – Research Team at ANZ, suggest that the clear message from the FOMC seems to be a holding pattern, waiting for further labour market strength to bolster confidence that inflation will return to trend, and also likely some stability in the global economics and financial market picture.

Key Quotes

“The Fed seems to have become more dovish on inflation, and is considering a wide range of information in its policy deliberations. As such, December is likely to be the earliest realistic window for the Fed to finally move.”

“The 0.375% projection for December suggests that the Fed’s central case is still a hike in one of the two remaining meetings (October and December) this year. Specifically, 13 of 17 members are forecasting a hike this year.”

“There appears to be a slight shift in Fed thinking on inflation. Yellen indicated that with headline inflation low, it may be prepared to let the labour market run that bit firmer in order to raise confidence that it will obtain its inflation objective over the medium term.”

“For foreign exchange markets the Fed’s dovish tilt has some important implications. The USD is likely to weaken somewhat further against G4 currencies, but the strength in peripheral currencies is likely to be temporary.”

“For rates markets curves are likely to steepen, swap rates decline, and high yield and other credit markets do well.”