While some macro data may be mixed and the dollar may have suffered a temporary setback, US Federal Reserve head Janet Yellen is likely to be hawkish toward’s the company’s economy but not to the extent that may impact the market negatively, says Peter Hooper, managing director and chief economist, Deutsche Bank.
Speaking to CNBC-TV18, Hooper says the insterst rates will be hiked earliest in March 2015.
Also read: The Fed: On course and on the moneyInvestors are keenly eyeing the Federal Reserve meet to know more about the US interest rate trajectory as there are concerns that an early hike may lead to capital outflows from emerging markets.
Below is the transcript of Peter Hooper’s interview to CNBC-TV18’s Latha Venkatesh.
Q: Just on the eve of the FOMC meet you see the dollar which has been climbing all along, actually climbed down a bit. Is it telling us something about the slowdown in the economy and therefore may be recalibrated expectations that the FOMC will be hawkish?
A: I think certainly some of the data have been mixed but overall I think this is a temporary setback for the dollar. I do expect the Fed to sound just slightly more hawkish in its upcoming meet but they are not ready yet to move the markets the big way. Yes, things are certainly going more or less on track but there was some disappointment in the August payroll report. The wage numbers have leveled off, wage and price inflation has leveled off. So people are getting the sense that the Fed is not yet ready to move things in a big way and perhaps see a little bit of selloff on the dollar on that. But I think it will change further down the road.
Q: What is your sense that the Fed might do? There were widespread expectations that they may drop the phrase ‘considerable time’ before rates are increased. You think that phrase will be changed at all?
A: I think so. The considerable time when Janet Yellen defined it back in March may be a little more specifically then she intended to at the time, she said it was about six months and on that basis six months away we are looking at is March. March I think is probably the earliest time that they could move but it is possible. If the data improves from here, we could see that happening. So if nothing else the Fed wants to at least have the flexibility and although their current expectations, the current expectations of the leadership is they probably won’t be moving until the middle of next year.
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