Fed: Gradual path towards a more neutral rates – Deutsche Bank

Analysts at Deutsche Bank point out that there were five Fed speakers overnight and the Fed’s Bostic who is a FOMC voter this year said “our goal is to get a more neutral stance” on rates.

Key Quotes

“He added that “we’ve embarked on a slow gradual move to neutral” and he is not anticipating a change to this path, but “to the extent things happen, we will respond”. Mr Evans also reiterated the gradual path towards a more neutral rates setting and then subject to the incoming data “we see how far we have to go beyond that”. On inflation, he noted that “to the extent that inflation continues to move towards 2%, above 2%, 2.25%, (it is) completely consistent with symmetry for our price objective”.”

“Elsewhere, Mr Williams said “I don’t see the signs of an inverted yield curve” and that “the flattening of the curve that we’ve seen is so far a normal part of the process, as the Fed is raising interest rates…”. On rates, his “own forecast would be that interest rates are going up gradually, smoothly”. Then on trade, he said “what worries me in this trade discussion is that uncertainty, even without action, can have a detrimental effect”. Elsewhere, Mr Harker noted the current unemployment rate of 4.1% is “at or below the natural rate in his view” and that the independence of the Fed is “crucial” to the US economy. Finally, Mr Quarles told the House Financial Services Committee that regulators can’t repeal the Volcker rules but “there’s a lot we can do to increase the certainty of application and reduce the burden of application”.”