Two steps by Fed in 2015

In today's speech on the economic outlook and in next week's semi-annual monetary policy statement before Congress Yellen might offer additional insights how the Fed's leadership sees the current data situation.

The current views held by FOMC members on the likely course reflect at most the present state of planning. The Fed will steer the actual course based on the data, not according to a pre-set course. 

"If the data are "soft", monetary policy will also be soft. "Hard" data, meaning good data, suggest a harder course with faster rate hikes", says Commerzbank.

A closer look at the dots shows that the Fed is hovering at the moment between one and two interest rate steps in 2015. Should the Fed's baseline scenario materialise (anunemployment rate of 5.2% - 5.3%, growth of 1.8% - 2.0% for Q4 2015) and there be further signs of rising wages, it will probably decide on two steps. 

The baseline scenario is not that tall a hurdle, especially as unemployment already fell to 5.3% in June. And on a domestic front, there is much to suggest robust economic growth in the US. The Fed is therefore likely to raise interest rates at a stronger pace medium term than the market is presently "pricing in", and this is in line with the wishes of FOMC members.