HALISTER1: Yellen May Be Short-Term Hawkish, ‘Low for Long’: Macquarie

Yellen May Be Short-Term Hawkish, ‘Low for Long’: Macquarie

(Bloomberg) --Fed Chair Janet Yellen could combine short-term hawkishness in her Jackson Hole speech this wk, with suggestion that rates will not rise much in current cycle, in Macquarie strategist Thierry Wizman writes in note.
  • Yellen could signal that while FOMC will raise policy rate in 2016, it is mindful that long-run real natural rate of interest is low, signaling a “low for long” rate outlook
    • “Could be satisfaction” for “hawks” in short term, “doves” in long term
  • Difficult for Yellen to obscure cumulative progress made by U.S. economy in recent mos.; “hawkish” short-term disposition will widen 2Y spreads between US and other developed mkts
    • EUR, CAD, JPY have been most sensitive to widening 2Y yield spreads; corresponding USD pairs probably offer best ways to buy USD if Yellen is hawkish
    • There’s room for probability of hike this yr to rise from current ~50% priced in by mkt
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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Janet Yellen (Federal Reserve System)
Thierry Wizman (Macquarie Group Ltd)

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