RESEARCH ROUNDUP: Fed Unlikely to Signal Much at July 26-27 Mtg
(Bloomberg) -- Fed policy makers aren’t likely to hint at timing of next rate increase at July 26-27 mtg in Washington, though better economic data suggests central bank could still hike at least once this yr, based on published research by economists and strategists.
- Commentary below about FOMC’s next mtg and U.S. monetary policy outlook; Sept. or Dec. seen as possible for next rate increase
- Fed funds futures fully pricing next rate hike in Oct. 2017; Oct17 implied rate 62.5bps, midpoint of 50-75bp target range
- Barclays (Michael Gapen)
- Fed officials will wait until after Aug. 5 release of July jobs report before using public remarks to signal gradual hikes
- Story link
- Don’t expect signal about next hike to come at Fed’s July 26-27 mtg; Yellen’s appearance at Jackson Hole in late Aug. is “more likely time for a shift in tone”; more
- BNP (Paul Mortimer-Lee, others)
- “Decent chance” rate hike could come as soon as Sept., following upward revision to U.S. GDP growth est. and easing financial/monetary conditions
- BNP previously expected no Fed rate increases in 2016 or 2017
- Story link
- Capital Economics (Paul Ashworth)
- Fed rate hike in Sept. is “still a distinct possibility”
- FOMC is unlikely to “spring any surprises” at July mtg or commit itself to a Sept. move
- Statement should acknowledge pick-up in 2Q GDP growth, recent strength in consumption, rebound in employment growth in June
- Story link
- Deutsche Asset Management (Joshua Feinman)
- Fed most likely to move rates in Dec., tread carefully
- For Fed to hike again, there would need to be signs that global/financial mkt risks post-Brexit “are remaining in abeyance,” labor mkt is healing, inflation is stabilizing or heading higher
- “Picture will come into focus” enough for Fed to act before end of yr
- Story link
- Morgan Stanley (Ellen Zentner, Matthew Hornbach, others)
- Statement to reflect lack of consensus at Fed, as policy makers drift apart after Brexit and given uncertainty about U.S. growth/inflation outlook
- Fed should say that “appropriate policy accommodation” will support economic activity, drop reference to “gradual adjustments”
- Story link
Alert:
HALISTER1Source: BFW (Bloomberg First Word)
People Ellen Zentner (Morgan Stanley)
Joshua Feinman (Deutsche Bank AG)
Matthew Hornbach (Morgan Stanley)
Michael Gapen (Barclays PLC)
Paul Ashworth (Capital Economics Na Ltd)
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