Halister News

(Bloomberg) -- FOMC’s July 27 statement is likely to note “generally better data,” say officials are still monitoring inflation/global risks, and leave door open for Sept. rate hike, BofAML economist Michael Hanson writes in note.

• Policy makers are “very” likely to keep policy unchanged as they assess outlook and debate need for hikes this yr; statement should give “no clear signals” about Sept.
  • Singling out next mtg would be “notable hawkish surprise” to mkts
  • Fed could cite progress toward dual mandate to suggest it’s “somewhat more comfortable” with a Sept. hike; there’s greater chance that minutes will sound “more upbeat” on potential for Sept.
• Statement shouldn’t materially change probabilities of rate hikes this yr; “we see a low, but not zero, probability of move in Sept.; BofAML’s base case remains Dec.
• While domestic data and global financial conditions have improved since Brexit vote, Fed is still watching data and ‘‘should remain cautious”
• Some chance FOMC will drop “closely” when describing its monitoring of inflation indicators and global developments; that would be seen by mkts as “mildly hawkish”
  • Dropping “monitoring” language completely would be both more hawkish and much less likely
• Given refusal of St. Louis Fed Pres. James Bullard to submit a long-run dot in June, there may be extended discussion about communications, particularly about dots