Fed's first rate hike to come in Sept: Barclays

The downward revision to NAIRU at the same time as the committee decided to eliminate the use of forward guidance strikes us as somewhat contrived and likely reflects a trade-off within the committee (the lower end of the central tendency estimate of long-term unemployment had remained steady at 5.2% since April 2011). 

Eliminating the use of forward guidance appealed to the committee's more hawkish members while a substantial upward revision to estimates of labor market slack gives something to more dovish members. 

The committee has historically downplayed the U3 unemployment rate, saying its decline overstated the true improvement in labor markets. 
Rather than repeating that message, the committee decided to move the goal posts and alter the definition of full employment. 

Given the reduction in NAIRU, we now see a much lower likelihood that the committee raises rates in June since labor markets are unlikely to fully close the gap in the next several months. 

Societe Generale notes its views on Thursday...

• We revise our forecast and now call for the first rate hike to come in September. 
  
  
• We also now expect the target range for the federal funds rate to reach 50-75bp in December, versus 75-100bp before. 
  
  
• A move in June remains a possibility should labor markets improve faster or if pass-through effects from a stronger dollar dissipate quicker than we anticipate. 
  
  
• We believe it will be difficult for the committee to wait past December given labor market momentum.