US: Let it rage - ANZ

Research Team at ANZ, notes that the debate on low nominal inflation and low neutral rates versus robust labour markets and elevated asset values continues to rage on in the US.

Key Quotes

“At the end of last week, Boston Fed President Rosengren said that gradual tightening is needed to ensure sustained full employment and that the US may already be a little bit beyond full employment. That said, Fed Board Governor Tarullo said that he would want to see actual evidence that inflation will rise, but won’t “foreclose” the possibility of a rate rise this year.

Dallas Fed President Kaplan said there’s a cost to rates at this low level, but the Fed can afford to be patient. He added the rate hike path is likely to be very shallow and very flat. There is one more speech from Governor Brainard today, which could move the dial either way. But given the split in views expressed so far, it seems the centralists will have the final say for September. Given what has been said so far it seems like it could go either way so brace for a little more volatility.”