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U.S. Interest Rates May Remain Low As 2015 FOMC Is Seen As Dovish - Deutsch Bank

By Kitco News
Wednesday December 31, 2014 11:32 AM

(Kitco News) - U.S. monetary policy might continue to remain loose in 2015 as the Federal Open Market Committee will have a dovish tilt, according to one U.S. economist.

In a research note published Tuesday, Joseph LaVorgna, chief U.S. economist at Deutsch Bank, rated the voting members of the FOMC next year, saying that the committee will be significantly more dovish compared to 2014.

Joseph LaVorgna, chief U.S. economist at Deutsch Bank

Looking back at the past year, he gave the FOMC a rating of 2.6 out of five; however, for 2015 he is giving the committee a rating of 1.8 out of five.

“Next year, we lose two of the most hawkish members in [Federal Reserve Governor Stanley] Fisher and [Philadelphia Federal Reserve President Charles] Plosser, and we lose a moderate hawk in [Cleveland Federal Reserve President Loretta] Mester,” he said in the report.

While there are no major hawks who will be voting members of the committee, LaVorgna said that there will also be only two centralist voters - Federal Reserve Governor Jerome Powell and Richmond Federal Reserve President Jeffrey Lacker.

“Clearly, this could have an impact on the timing of interest rate normalization next year, especially if the decision to raise rates around the middle of next year turns out to be a close call,” said LaVorgna. “The economy will certainly have to be performing well along with noticeable evidence of wage and/or price pressure.”

The timing of the Fed’s first interest rate hike was a significant theme in 2014, which helped drive the U.S. dollar higher and gold prices lower. At a press conference following the December monetary policy meeting, Fed Chair Janet Yellen said that interest rates will remain unchanged for at least two meetings.

As a result, some economists are expecting the first rate hike as early as June, but markets are pricing in a move at the September meeting.

However, some economists and market analysts have been skeptical that the Fed Funds Rate will move higher in 2015. They have also said that any renewed expectation of looser U.S. monetary policy for a longer period could create some weakness in the U.S. dollar and in turn help push gold prices higher.

By Neils Christensen of Kitco News nchristensen@kitco.com



Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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