In the opinion of analysts at Danske Bank, today’s press conference by Chairwoman J.Yellen could be on the hawkish side.
“In terms of the statement we expect the tone to be slightly more upbeat than in April given the latest more positive run of US data but we do not expect any major changes in the forward-looking part of the statement”.
“More interesting will be Chair Yellen’s comments at the following press conference. Key will be the FOMC view on how much of the Q1 economic weakness is temporary and how this, combined with the most recent more positive data, has affected its economic outlook”.
“While Yellen and other key FOMC members have repeatedly said that they believe that weakness was in part due to transitory factors, others such as NY Fed President Dudley has sounded more worried”.
“However, the strong May employment report, solid May retail sales and preliminary June consumer confidence on top of signs that wage inflation is moving higher and core inflation is stabilising, should have improved the FOMC’s confidence in the outlook”.
“Hence, at the current juncture we believe a majority of the voting members of the FOMC prefer a first rate hike at the September FOMC meeting”.
“Yellen’s comments at the press conference should reflect this increased confidence. While the April FOMC minutes showed that there was no backing for pre-announcing a coming rate hike, we do believe that Yellen will strike a more positive tone and state that if the recent improvement continues, come September it will likely be ‘reasonably confident that inflation will move back to its 2% objective in the medium term’.