BoA / ML on the Fed: June, nah. July, nah. September, yep.
BoA / Merrill Lynch on the timing question of the next Fed rate hike
- Clear that June is very much on the table
- What is less clear is whether the Fed is just protesting the super-low probability priced into the markets or is setting us up for a June hike
- We are sticking to September
- September still seems most consistent with Yellen's high risk aversion
- June seems a bit early given how dovish she has sounded
- With the market pricing in just a 34% chance of a move, it would shock the markets and bring into question their credibility ... This would draw attention to the competence of the Fed during an election year
- The Fed would also be moving in front of the Brexit vote, a potential serious shock to financial markets
... This is a close call and we will be nimble going forward. Payrolls on June 2nd and a Yellen speech on June 6th could change our mind.
-
Interesting comments from ML on July, though:
July is also live, but suffers the usual problem of not having a scheduled press conference
The Fed has made it clear that they can call a press conference on short notice. However, it would still require meticulous preparation from Yellen.
Fed's Yellen: We're want to do everything to avoid a financial crisis
She's talking about her academic past and broad themes in economics, not the outlook.
- Fed's handling of crisis was 'nothing short of magnificent'
- QE and forward guidance have helped economy recover
- I saw the housing price bubble
- I didn't see the financial crisis coming
- We're trying to do a better job of seeing systemic and financial risks
- We're better at seeing financial risks and conditions now
Finally on the economy:
- Labor market by almost any metric has really improved
- We've created 14m jobs since low point of employment
- Labor force participation has moved up in past year, that's encouraging
- No of part-time workers who want full-time work is high
- We haven't seen much improvement in wage growth, which is suggestive of some slack in the labor market
- Productivity growth is very slow, 'miserable' in historical perspective over past 5 years
- Inflation remains below the Fed' goal
- Our measure increased only 0.8% y/y, partly due to oil and USD
- My own expectation ... is that inflation will move back up over the next couple years to our objective
You are missing trading opportunities:
- Free trading apps
- Over 8,000 signals for copying
- Economic news for exploring financial markets
Registration
Log in
You agree to website policy and terms of use
If you do not have an account, please register
Comments from the Fed's Williams in New York: