HALISTER1: Fed Is Making Conscious Move to Behind Curve From Ahead: BofAML

Fed Is Making Conscious Move to Behind Curve From Ahead: BofAML

(Bloomberg) -- “The central theme in rates remains a transition from the hawkish Fed policy mistake priced in to a Fed behind the curve trade,” BofAML’s Shyam Rajan and Dora Xia write in note.
  • Fed is trying to move from “hawkish policy mistake currently priced in (high real rates, below target inflation)” to BOE’s “dovish mistake (low real rates, above target inflation)”
    • In transition, Fed hopes to avoid stalling at ECB’s mistake of “policy impotence (low real rates, below target inflation)
  • ‘‘The Fed is making a conscious move from ahead of the curve to behind the curve”
  • U.S. data remains “necessary, but insufficient” to trigger higher rates
  • Disagree that Fed has to “babysit” mkt to price in higher probability of a hike; when U.S. data and global developments are positive, mkt can price in higher probability without Fed guidance
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Dora Xia (Bank of America Corp)
Shyam Rajan (Bank of America Corp)

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