Fed moving closer to a move in September but December is more likely - Wells Fargo

According to analysts from Wells Fargo, after yesterday’s FOMC statement, the Federal Reserve appears to be moving closer to a move either in September, but in their view, more likely in December.

Key Quotes:

“FOMC statement highlights the importance of deducing reasonable conclusions based upon limited information. Consider this detective work for economists. Information is imperfect but insights mandatory.”

“Near-term risks to the economic outlook have diminished.” So now it appears we are moving closer to a FOMC move either in September, but in our view, more likely in December .”

“This assessment will take into account…readings on financial and international developments.” Here we have now the third leg of the monetary policy stool that has stood outside the traditional full employment/inflation duality of the monetary policy mandate. This third leg has appeared/disappeared/reappeared in FOMC statements over the past year, much as a suspect in a good detective show.

“Unfortunately, assessing what is the character of “international developments” specifically is very difficult, like an intriguing suspect. Do we measure GDP? How about sentiment or market volatility? This international factor reemphasizes the importance of imperfect information and making guesses on the path of many economic and financial developments outside the bounds of the domestic economy. For us, we will go with volatility since that appears, post-Brexit, to be the one factor that raises the risk profile—like walking down a dark alley at night.”