RESEARCH ROUNDUP: Dec. Fed Hike Done Deal; 2017 Dot Won’t Change
Source: BFW (Bloomberg First Word)
People
Candace Browning (Bank of America Corp)
Chris Rupkey (Bank of Tokyo-Mitsubishi UFJ Ltd/The)
Ellen Zentner (Morgan Stanley)
Michael Feroli (Bear Stearns & Co Inc)
Michelle Meyer (Bank of America Corp)
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UUID: 7947283
(Bloomberg) -- FOMC is unlikely to alter its forecast for two rate hikes in 2017 in Wednesday’s decision; too soon for officials to judge economic impact of Trump administration policies, based on published research from economists and strategists.
Alert: HALISTER1- Dec. 14 rate hike is seen as a virtual certainty; market- implied probabilities stand at 100%; fed funds futures fully pricing one rate hike this month; 63 of 64 Bloomberg- surveyed economists expect a 25bp hike on Wednesday
- JPMorgan sees Fed hiking twice next year, in line with FOMC’s median forecast in September; Morgan Stanley expects Fed to keep 2017-2018 dots the same
- See also: Research Roundup: U.S. employment report clears way for Fed
- Bank of Tokyo-Mitsubishi (Chris Rupkey)
- December hike to be followed by one 25bp hike in every quarter through 2Q 2019; UST 10Y yield to end 2017 at 3%
- Don’t expect Yellen to continue as chair beyond the end of her current term, which ends in early 2018, given Trump statements
- MORE
- BNP (U.S. economics team)
- Fed to hike fed funds rate by 25bps; expect little guidance beyond what’s already in Fed’s projections
- Statement could include upgraded assessments in first paragraph, description of risks as appearing “balanced,” unanimous decision to hike
- No changes seen to Fed’s median dots; too early for big changes to summary of economic projections; most on FOMC will probably wait for more clarity
- “Elephant” at Yellen’s press conference is question of how Fed will respond to changes in fiscal outlook; impact remains “highly uncertain”
- MORE
- BofA (Candace Browning, others)
- Market’s expectation for Fed hikes in coming years has room to rise
- Inflation “party” has started, with core PCE expected to rise to 1.9% by end of 2017, “approaching if not overshooting the Fed’s 2% inflation target”
- Economist Michelle Meyer expects Fed to hike once in 2017, three times in 2018
- MORE
- Credit Suisse (Praveen Korapaty, others)
- Strengthening data “clearly” leaves Fed’s December hike intact
- Market isn’t pricing in enough risk of Fed hikes in 2017-2018; Trump administration is likely to have passed some fiscal initiatives by 2H 2017-1H 2018
- In phone interview, Korapaty said “we will probably get a small move up in dots;” Fed’s Dec. 13-14 meeting could be a “catalyst” for markets to start repricing number of hikes expected in 2017-2018, if Fed statement or Yellen’s press conference is more hawkish than expected
- MORE
- JPM (Michael Feroli, others)
- Dec. 14 rate increase appears to be close to a “done deal” ** Policy makers won’t have strong view on how Trump administration policies will impact outlook before Inauguration Day on Jan. 20
- FOMC to hike twice in 2017; may wait until next March and May meetings to signal a mid-year hike; second hike seen next December
- “Tentative” forecast has Fed hiking twice more in 2018
- MORE
- Macquarie (Thierry Wizman)
- Base case is for hike on Dec. 14; sees at least two, possibly three moves in 2017, with the first hike in 1H
- UST 10Y yield to end 2017 at 3%; USD likely to soar on divergence between monetary and fiscal policy
- MORE
- Morgan Stanley (Ellen Zentner, Ted Wieseman, others)
- December hike to be followed by 2017 hikes in September and December, three more in 2018
- Fed will stick to its path for target rate for now as it’s still too early for central bank to build in assumptions around fiscal policy; expect a slight downward revision to NAIRU as well as longer-run neutral rate
- Market possibly pricing in a “decent probability” that median dots shift higher at FOMC meeting, though current market expectations are along FOMC’s projections
- MORE
Source: BFW (Bloomberg First Word)
People
Candace Browning (Bank of America Corp)
Chris Rupkey (Bank of Tokyo-Mitsubishi UFJ Ltd/The)
Ellen Zentner (Morgan Stanley)
Michael Feroli (Bear Stearns & Co Inc)
Michelle Meyer (Bank of America Corp)
To de-activate this alert, click here
UUID: 7947283