FOMC Officials’ Speeches: To Hike or Not To Hike?

After last week’s slew of speeches from Fed officials, forex junkies were treated to a fresh batch of testimonies from FOMC members early this week. With most market watchers still unsure about what the U.S. central bank has up its sleeve for the rest of the year, everyone’s on the lookout for any clues that might show when a liftoff is bound to take place. Here’s a quick rundown of what the U.S. policymakers had to say.

Fed official Daniel Tarullo

  • Focused more on financial regulation and capital requirements for insurance companies
  • Speech didn’t discuss any economic outlook or monetary policy bias (Boo!)

Fed Vice Chairman William Dudley

  • U.S. economy is doing pretty well, but China poses a huge risk to the global economy
  • Financial conditions and global growth prospects could affect liftoff decision
  • Confident that inflation will rise in the medium-term but not 100% sure
  • Still expects the Fed to hike later this year
  • Fed will continue to watch financial conditions closely after first hike and move carefully from there

Fed official Charles Evans

  • Nope, not the dude who played Captain America. Probably not related either.
  • Normalizing policy too early might bring risks to wage growth and inflation
  • “Fairly confident” about reaching employment goals, not so confident about inflation hitting the 2% target
  • Low energy prices and strong dollar to weigh on price levels, core inflation tends to change slowly
  • Gradual tightening necessary: Three rate hikes of 0.25% would be appropriate for next year

Fed official John Williams

  • Speech is titled “The Economic Outlook: Live Long and Prosper” so he must be a Star Trek fan, too. We should be BFFs.
  • U.S. economy continues to strengthen but global growth poses downside risks
  • Consumer spending and labor market strength are supporting the economy
  • Inflation is still lower than he’d like, but there are upside risks to his forecasts
  • “[A]n earlier start to raising rates would allow us to engineer a smoother, more gradual process of policy normalization”

Unlike the testimonies from the Fed officials last week, it seems that there were more doves than hawks this time around. Evans expressed concerns about hiking interest rates too early, Dudley gave more cautious remarks, Williams reiterated his upbeat assessment, and Tarullo was on a completely different universe. A few days ago, Fed head Yellen hinted that a liftoff is still likely to take place this year while Lockhart also supported this view.

Take note that they’re all voting members of the policymaking committee, which suggests that we might see at least three officials (out of 10) calling for tightening by October or December. Do you think we’ll see a majority vote for a liftoff this 2015? Take a look at what our running poll results show and don’t be shy to cast your votes as well!