Dec is an appropriate time to hike – Nomura

Analysts at Nomura explained that recent fed communications suggest that the Committee is on track to raise rates this year.

Key Quotes:

"Chicago Fed President Evans stated during an interview that “December could be an appropriate time to [raise rates]”. Philadelphia Fed President told reporters earlier this week that he thought it best to avoid raising rates in November due to the uncertainty surrounding the outcome of the presidential election, but thought the Committee should raise rates once by the end of this year. We still expect the next rate hike will come at the December meeting, as long as the data are broadly in line with expectations."

"Chair Yellen spoke at an annual economic conference sponsored by the Federal Reserve Bank of Boston. Although her remarks did not delve into near-term policy discussions, she did seem to advocate for a more dovish policy stance as she discussed the possibility of “temporarily running a ‘high-pressure economy,’ to recover further from the “supply-side damage” done by the last recession. It appears that she believes that there is still some labor slack, and allowing the labor markets to tighten some more could be beneficial and not necessarily inflation inducing."

"Next week, industrial production and regional manufacturing surveys data will provide more insight into manufacturing activity and labor market conditions in the economy. September CPI data are also scheduled to be released. We expect headline CPI to show a 0.4% m-o-m increase in September, which would push up the year-over-year change rate to 1.6% from 1.1% in August. The net impact of September PPI data on our CPI forecast is limited as the increase in food and electricity prices implied by PPI data created a boost in our CPI forecast, but it was offset by a sharp drop in hotel prices."

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