HALISTER1: U.S. ECO PREVIEW: FOMC Policy Decision Due in 5 Minutes

U.S. ECO PREVIEW: FOMC Policy Decision Due in 5 Minutes

(Bloomberg) -- Federal Open Market Committee seen maintaining benchmark interest rate with 0.25% lower bound, 0.50% upper bound.
  • Trading in federal funds futures imply ~22% probability of tightening today, ~29% for Nov., ~58% for Dec.
  • See also:
    • RESEARCH ROUNDUP: FOMC’s Dots to Fall, Point to 1 Hike by Yr-End
    • Decision-day guide: Fed Focus Turns to Dots as Hike Odds Fade
    • Fed to Implement Hawkish Hold With Eye on Dec., Bloomberg Intelligence writes
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

Topics
First Word DC - Foreign Policy

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UUID: 7947283

HALISTER1: ECB Would Find It Difficult to Emulate BOJ Policy Shift: BofAML

ECB Would Find It Difficult to Emulate BOJ Policy Shift: BofAML

(Bloomberg) -- ECB emulating the new policies the BOJ announced this morning faces at least four obstacles, BofAML analysts Gilles Moec and Ruben Segura-Cayuela write in client note.
  • A credible commitment to continue QE until inflation hits 2% would be a better option, in any case
  • Any shift to price targeting in the ECB’s QE program would be difficult to communicate; central bank purchases would become a function of bond supply determined by national fiscal policy, QE purchases reflecting the capital key could get very challenging and determining the “right” level of 10Y yields in region with 19 members is complicated
  • Legal aspects from the German constitutional court ruling on the OMT may further complicate such a change
  • And a steeper curve need not help inflation reach the ECB’s target; in fact a steeper long end of the curve without a significant move in inflation expectations could lead to weaker growth and long-term inflation
  • NOTE: The BOJ’s policy shift to “QQE with yield curve control” will be important for European markets as it re- frames the policy discussions around upcoming ECB meetings, RBC says
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

Tickers
2539Z GR (European Central Bank)

People
Gilles Moec (Merrill Lynch International)
Ruben Segura-Cayuela (Merrill Lynch International)

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UUID: 7947283

HALISTER1: Brazil Market Lifts Bets on Rate Cuts Amid Reforms, CPI Outlook

Brazil Market Lifts Bets on Rate Cuts Amid Reforms, CPI Outlook

(Bloomberg) -- Brazil swap rates are falling for a 6th day in a row and investors are raising bets on a BCB rate cut as the outlook for fiscal reforms improve and amid fresh signs of easing inflation.
  • Among three factors cited by BCB as conditions for a cut, two -- food inflation and reforms -- have seen outlook improve, David Beker, Chief Brazil Economist & Strategist at BofAML, says in a phone interview
    • Food prices have slowed significantly in recent private surveys conducted by banks in Brazil; on political side, there have been increasing signals that a spending cap bill may be approved
  • NOTE: DI rates price in 144bps cut by February vs 124bps on Sept. 14; cut projected for Oct. 19 BCB meeting is now 18bps vs 12bps a week before
  • First move in November looks more likely at this stage, Neil Shearing, chief EM economist at Capital Economics, says
    • “We’ll find out more about food inflation with tomorrow’s IPCA-15 data, but my sense is that it’s better for policymakers to play a waiting game for now”
  • While cut is more likely in November, October meeting is not off the radar, Eduardo Velho, economist at INVX, says
    • U.S. Fed rate stability may help BCB to cut; “Should we have no worsening on inflation side and the Lower House commission vote the fiscal spending cap bill, the BCB may start the cycle”
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
David Beker (Bank of America Corp)
Eduardo Velho (Invx Global Partners)
Neil Shearing (Capital Economics Ltd)

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UUID: 7947283