Comments from Wheeler:
- Growth softened due mainly to lower terms of trade
- Risks are that dairy prices remain weak and El Nino spurs drought
- Could cut more aggressively and return to inflation target sooner but would create housing risks
- Inflation expectations 'where we want them'
Cited six reasons for cutting today
- Inflation pressures are pretty muted
- Exchange rate has appreciated 6% since Sept
- Oil prices down about 6% since Sept
- We see volatility in milk prices
- There is uncertainty around the commodity price outlook
- There are risks around China and global growth
More comments:
- We've seen real incomes rise significantly in the last few years
- The Fed has done a good job trying to move market expectations
- There's a heavy expectation, in excess of 75, the US will move in Dec
- The exchange rate reaction is tough to anticipate
- Impact on FX likely to depend on Fed statement
Wheeler sounds like FX trader with the way he was breaking down the FOMC decision.
