HALISTER1: Fed to ‘Inch Closer’ to a June Hike Next Week: Morgan Stanley

Fed to ‘Inch Closer’ to a June Hike Next Week: Morgan Stanley

(Bloomberg) -- Fed is likely to keep fed funds rate at 0.75%-1% at its next meeting, with very little change needed to statement, Morgan Stanley economists led by Ellen Zentner and strategist Matthew Hornbach wrote on Thursday.
  • Fed remains on track to deliver three rate increases this year, with next move at June 13-14 meeting
    • With market pricing in a more than 60% chance of a June hike, Fed can avoid sending signals
  • FOMC will probably acknowledge that labor market is still improving, inflation is moving closer toward objectives, and business investment is rising
  • Investors are more likely to react to clues about Fed’s balance sheet discussions in weeks to come, when FOMC participants give speeches and interviews
  • MS continues to recommend holding EDZ7/EDZ9 flatteners, UST 3s30s steepeners

Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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Ellen Zentner (Morgan Stanley)
Matthew Hornbach (Morgan Stanley)

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