Yellen more dovish than recent speech -  Danske

According to analysts from Danske Bank, in yesterday’s speech, Janet Yellen sounded more dovish than before, supporting the view that a rate hike during the US summer is off the table.

Key Quotes:

“Yellen was much more dovish than in her recent speech, as she did not repeat that a hike 'in the coming months' could be appropriate, which supports our view (and market expectations) that a summer hike is off the table.”

“Overall, Fed chair Yellen did not sound like a central banker about to hike, leaving us to conclude that a summer hike seems unlikely. Even if data we get before the July meeting come out better than expected and the June jobs report is very strong, the Fed would probably not have enough time to prepare markets for a July hike.”

“As we have argued previously, most voting FOMC members have a dovish to neutral stance on monetary policy and are unlikely to raise rates too much, too quickly. If data disappoint, they will prefer to postpone the second hike rather than raise rates further prematurely.”

“Currently, we stick to our view that the Fed will hike in September but risks are skewed towards a later hike. If September is off the table, the next possibility seems to be December, as the November meeting is less than a week before the US presidential election.”