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23rd February 2015
Federal Open Market Committee Minutes

Slowly approaching into March the US rate increase expectations are melting along with the winter snow. The release of January FOMC Minutes has divided the audience with regards to the timing of the next rate hike, however the prevailing consensus is that this will happen later rather than sooner. In this report, we will look at the key takeaways from the January FOMC meeting Minutes and examine what are the implications for the rest of the economy.


“Several participants noted that a late departure could result in the stance of monetary policy becoming excessively accommodative, leading to undesirably high inflation…. Some participants were concerned that a decision to delay the commencement of tightening could be perceived as indicating that an overly accommodative policy is likely to prevail during the firming phase.”


Minutes of the Federal Open Market Committee (available here).


The dilemma “to raise or not to raise” is gaining on intensity...

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16th February 2015
Carney hints at rate rises despite expectations of deflation…

“The most likely next move in monetary policy is an increase in interest rates…”

Mark Carney, Bank of England Governor, February 12 2015


“Relative to the recent past, the economic outlook is much improved…while there is always uncertainty about the future, you can expect interest rates to begin to increase.”

Mark Carney, Bank of England Governor, September 25 2014


“There’s already great speculation about the exact timing of the first rate hike and this decision is becoming more balanced.  It could happen sooner than markets currently expect.”

Mark Carney, Bank of England Governor, June12, 2014



There is no question that Mark Carney has succeeded in completely confusing the financial markets about his intentions.  Before the UK inflation report was released last week, the expectations of an interest rate rise in 2015 were effectively zero (as measured by the UK interest rate futures market).  Immediately following the release of the UK inflation report last week, this probability...

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9th February 2015
US Employment Report: How strong is the bullish dollar case?

Over the past six months we have experienced one of the biggest US dollar rallies in recent history, where the USD reached highest level since the dot-com bubble on a trade-weighted basis. The outlook for 2015, with a diverging monetary policy between the US and the rest of the world, dictates that this one directional trend is likely to continue. Last week’s jobs data sent a strong signal to the financial markets that the US labour sector is recovering. Examining the employment report in detail, we reassess the strength of the bullish dollar case in 2015.


Chart I: USD Trade Weighted Index 



Employment report in detail…



 a) January non-farm payroll and upward Nov/Dec revision


The flashing headline for the non-farm payrolls at 257k in December strengthened the optimism about the US economy. The markets were expecting a drop from the previous 252k to 235k. In addition, the past numbers for November and December were revised...

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