Although some members of the FOMC voting board continue to call for an imminent rate hike, more members agree that conditions for a liftoff have not yet been met as disagreement reigns supreme at the Federal Reserve. The positivity of labor statistics was overshadowed by the softness in inflation and was cited as the main obstacle to raising rates sooner rather than later. While policymakers expect a rebound in energy prices in the second half of the year to eventually spur inflation, there are still substantial downside risks as evidenced by the downtick in the core inflation released earlier in the session. The probability of a September liftoff has now dropped below 50% as more participants see December as the earliest possible date for a rate hike. The kneejerk reaction to the news sent the dollar tumbling but USD has since recovered, notably retracing half the move against JPY.
Fed Liftoff Probability Falters
Daily Analysis - 20/08/2015