At the upcoming December 15-16 FOMC meeting, Fed Chair Janet Yellen is likely to reiterate what she said at the Congressional testimony which is that the economy is expanding at a moderate pace and they made significant improvement in terms of reaching full-employment, said Michelle Meyer, deputy head of US economics at Bank of America Merrill Lynch.
Inflation is so low they think conditions warrant the beginning of the cycle. But really the conversation is how the path would look like. And that really still sounds pretty cautious. Yellen’s latest comments suggest that there’s really no promise in terms of how quickly the Fed’s going to hike rates.
Policymakers do want to see an environment where inflation is starting to pick up, and they want to have confidence that some of the downside risks from abroad have truly abated. So while they go in December, there will be a question about how quickly the cycle ends up looking, she noted.
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