Citi Thinks The Fed Will Use Its September Meeting To Tee Up A December Rate Hike

Fed Chairman Janet Yellen’s recent comments do not mean that the case for a rate hike had strengthened nor that “the timeless nature of the comment is consistent with market expectations coming into the meeting,” Citi’s Steven Englander said in a report.

Analyst Englander added that Fed Chairman’s comments seemed to indicate that “she intends to use the September meeting to tee up December.”

Reading Into The Key Quote

The key quote from Fed Chairman’s speech was that against the backdrop of the labor market’s continued solid performance and the Fed’s outlook for economic activity and inflation, the case for a rate hike had strengthened in recent months.

“That is not the same as saying that the case for a near¬-term increase has strengthened and the timeless nature of the comment is consistent with market expectations coming into the meeting,” Englander wrote.

The market was not expecting Yellen to indicate a hike in September, and “the sense is that she could have if she wanted to make it live,” the analyst pointed out.

While oil has gained, along with equities, Treasury yields have declined marginally and non¬oil commodities remain flat. Currency headwinds have offset some of its gains, while EM and the G10 commodity currencies were doing well. “There is enough ambiguity in her comments to keep September live but nothing that puts it on the front burner,” Englander pointed out.

Do you have ideas for articles/interviews you'd like to see more of on Benzinga? Please email feedback@benzinga.com with your best article ideas. One person will be randomly selected to win a $20 Amazon gift card!