Fed mid-year rate hike plan on track, but risks exist – ANZ

FXStreet (Barcelona) - The Team at ANZ, expect Fed to start its normalization process around mid-year, but note that further USD strength and lower core inflation might cause a delay in the plan.

Key Quotes

“Survey-based measures of inflationary expectations have been stable. That said, the recent subdued nature of inflation and the absence of a pick-up in inflation pressures may afford the Fed more time to think about the normalisation process.”

“Yellen’s outlook for the USD, core inflation and wages will be critical.”

“Our baseline view is that the Fed can start its normalisation process around mid-year.”

“That said, any further drift lower in core inflation could see it delayed, as could an aggressive appreciation of the USD.”

“Regardless, we expect the normalisation path, once it starts, to be a very gradual.”