HALISTER1: Fed May Raise Rates in June, Dec After Dovish FOMC Spin: BofAML

Fed May Raise Rates in June, Dec After Dovish FOMC Spin: BofAML

(Bloomberg) -- The FOMC put a dovish spin on communications, most notably by dropping the likely number of rate increases this year to two, from four, writes BofAML’s Michael Hanson and Mark Cabana in a client note.
  • Dovish tilt was a surprise, given recent improvement in data, particularly inflation
  • April rate rise seems unlikely, expect next increase in June, followed by Dec.; see three hikes in 2017
  • Market now pricing ~45% odds of a hike at the June meeting, one full hike by the end of 2016, which looks fair given Fed’s communications
  • FOMC outlook supportive of lower real rates, wider breakevens; higher beta FX will likely outperform vs the dollar in near term, unless data reinforce expectations for a June hike
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Mark Cabana (Bank of America Corp)
Michael Hanson (Bank of America Corp)

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