HALISTER1: Fed Likely to Have ‘Active’ Talks on Right Policy Path: BofAML

Fed Likely to Have ‘Active’ Talks on Right Policy Path: BofAML

(Bloomberg) -- FOMC will likely engage in active “behind-the-scenes” discussion of appropriate path for policy at July 26-27 mtg, BofAML economist Michael Hanson writes in note.
  • BofAML maintains view that Fed will let inflation overshoot
    • One consequence is that policy will remain “very” accommodative in near term; as Fed tries to bring inflation back to target, rates would rise over time more than mkt currently expects
    • “Inflation overshooting means eventual policy overshooting as well”
  • If inflation stays persistently below target, Fed will not need to tighten policy; BofAML doesn’t see that as likely
  • A recession in next few yrs would “certainly” preclude Fed from hiking as much as might be suggested
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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Michael Hanson (Bank of America Corp)

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