RANsquawk EU Open Rundown 15.06.17
15 Jun 2017, 06:56
- Fed hiked by 25bps as Exp. & outlined plans for balance sheet normalisation, expects inflation and growth to pick up
- Subsequently seen as more hawkish than anticipated; support for US yields, USD, equities hampered before recovering into the close
- Looking ahead, highlights include SNB & BoE rate decisions, US weekly jobs and Philly Fed
- The Fed hiked rates 25bps to 1.00%-1.25% as expected; Kashkari was the lone dissenter.
- Fed officials: 8/16 see one more hike in 2017, with 4/16 seeing two for the remainder of the year. Dot plot largely unchanged
- Fed expects to implement balance sheet normalization this year, initially trimming re-investments in Tsy securities by USD 6bln/month, and MBS by USD 4bln.
- Fed said the cut to reinvestment seen is expanding on a quarterly basis until it reaches USD 30bln/month for Tsys and USD 20bln for MBS.
- Fed didn’t specify the long-run size of the balance sheet, but said it would suspend normalisation if economic conditions change.
- Economic growth appears to have rebounded after the first quarter slowdown.
- Expects inflation to move up, and stabilize around 2% and the FOMC is monitoring inflation developments closely.
- Additional gradual rate hikes will be appropriate over the next few years.
- The Fed expects to begin implementing balance sheet plan this year.
- The release was overall seen as slightly more hawkish than anticipated given plans for reinvestment adjustments and the Fed overall upbeat about data despite recent disappointing numbers
- This stopped the rot seen in US treasury yields after yesterday’s retail sales and CPI with USD supported and some downside in the S&P 500 before recovering into the close