New York Fed President, William Dudley spoke last night?, speaking words of a balanced US economy and stating that Zero percent interest rate are an uncomfortable place to be.
Dudley’s comments are that markets shouldn’t read too much into the Fed’s Dot Plot, and that the USD being on the zero lower bound of interest rates is “not a particularly comfortable place to be.”
Mr Dudley said that to the hawks on the FOMC, that the Fed has a dual mandate, and that monetary does work with a lag; saying “you wouldn’t put all your weight on inflation side just as you wouldn’t put all your weight on the labour side.”
He went on to say that Monetary Policy operates differently than it has in the past; also that he understands that this creates uncertainty and nervousness within the economy. Dudley then stated that there seems to be excess slack in the economy.
The main point that were taken from the address, following the same theme from Fed Chair Janet Yellen; was the clear intention for Interest Rate hikes in the future.
The Governor of the Reserve bank of Australia is speaking Wednesday and Thursday. On Wednesday the RBA will have the Financial Stability Review. Thursday, Stevens is due to speak at the Melbourne Economic Forum. Both of these events should bring a bit of volatility to the market depending on the subjects and concerns that are raised.
Last night after Dudley’s comments, the USD found profound strength against the AUD gaining almost 0.8%. This trend is likely to continue if Governor Stevens chooses to take a dovish stance about the AUD and the Australian economy.