9 Jun 2015
June FOMC Meeting: Not so great expectations – BAML
FXStreet (Barcelona) - According to BofA-Merrill Lynch, although the June FOMC Meeting would be pivotal, no rate hikes are expected from the Fed, and market pricing suggests September would be the first ‘live’ meeting for rate normalization to begin.
Key Quotes
“Next week's FOMC meeting will be pivotal, but not because a rate hike is likely. Indeed, the rates market sees a near-zero probability of a hike in June, despite Friday's strong employment report. The July meeting is expected to be a non-event as well, with just 2.5bp of slope priced into the inter-meeting forward OIS curve.”
“Unsurprisingly, the market is treating September as the first truly "live" meeting. Market-implied odds of a September liftoff have increased somewhat over the past few weeks as data have improved, but with 10bp currently priced in, the market remains unconvinced a September hike is likely.”
“This likely reflects lingering uncertainty about the prospects for a growth rebound after a disappointing start to the year. However, our 2Q GDP tracking model now stands at 2.9%, as Ethan Harris notes in his latest Ethanomics.”
“With growth picking up, September remains our base case for the first Fed hike, a view that was affirmed by the latest employment report. In light of this, we reiterate our Aug-Oct 2015 forward OIS curve steepener recommendation (11 bp), which we continue to see as a cheap way to position for a September rate hike.”
Key Quotes
“Next week's FOMC meeting will be pivotal, but not because a rate hike is likely. Indeed, the rates market sees a near-zero probability of a hike in June, despite Friday's strong employment report. The July meeting is expected to be a non-event as well, with just 2.5bp of slope priced into the inter-meeting forward OIS curve.”
“Unsurprisingly, the market is treating September as the first truly "live" meeting. Market-implied odds of a September liftoff have increased somewhat over the past few weeks as data have improved, but with 10bp currently priced in, the market remains unconvinced a September hike is likely.”
“This likely reflects lingering uncertainty about the prospects for a growth rebound after a disappointing start to the year. However, our 2Q GDP tracking model now stands at 2.9%, as Ethan Harris notes in his latest Ethanomics.”
“With growth picking up, September remains our base case for the first Fed hike, a view that was affirmed by the latest employment report. In light of this, we reiterate our Aug-Oct 2015 forward OIS curve steepener recommendation (11 bp), which we continue to see as a cheap way to position for a September rate hike.”