Halister News

(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