Ian Shepherdson Hike Quotations

As far as we can tell, just about everyone now expects another 25-basis-point hike on May 16, which rather begs the question why the Fed did not act more boldly today and raise rates by 50 basis points. By the time of the May meeting, a bigger move might be forced upon the FOMC.

Preparing the markets for a rate hike is a process in which the Fed gradually has to back away from its unduly pessimistic stance of recent months. This will take some time, but the process is now underway.

If February is broadly similar, a March 28 rate hike is assured. The May meeting's risk is rising.

The Fed's minutes do not change the near-term outlook for policy despite the strong market reaction. Clearly there is some debate as to how much further tightening will be necessary, as the minutes say the number of hikes will likely 'not be large,' but 'large' is undefined. This does not read like a Fed where everyone is looking for a reason to stop.

We doubt that this report unambiguously points to slower growth ahead --but it does mean no rate hike on (Aug.) 22,

We doubt that this report unambiguously points to slower growth ahead -- but it does mean no rate hike on the 22nd.

The chairman's remarks clearly signal rates will rise this month, though we remain of the view that a November hike is not yet a done deal.