HALISTER1: RESEARCH ROUNDUP: Fed Hike Outlook ‘in Tatters’ Post-Brexit

RESEARCH ROUNDUP: Fed Hike Outlook ‘in Tatters’ Post-Brexit

(Bloomberg) -- Any “faint prospect” of a Fed July rate increase has entirely vanished, ING economist Rob Carnell wrote in note; long-standing ING call for Sept. hike looks to be “hanging in tatters.”
  • More commentary below about U.S. monetary policy outlook following outcome of U.K. referendum.
  • Fed funds futures price 1st rate hike to 0.50%-0.75% range as more than likely for Dec. 2017 to 1H 2018, from Jan. 2017 at yday’s close
  • Global mkts roiled by Britain’s vote to leave EU; GBP fell to lowest in more than 30 yrs and stocks tumbled, while demand rose for haven assets
  • BofAML (Ethan Harris, others)
    • Next Fed hike now seen in Dec., not Sept.
    • Brexit vote is another in “long string of confidence shocks,” will reduce U.S. GDP by an est. 0.2ppts over next 6 qtrs
    • Story link
  • BoT-Mits (Cliff Tan)
    • Brexit will tighten financial conditions, mkt reaction is going to possibly be “pretty severe” over next few trading days
    • Story link
  • Janus Capital (Bill Gross)
    • Fed’s dots have no future relevancy
    • Brexit was storming of the gates of finance by populists
    • Story link
  • Renaissance Macro (Neil Dutta)
    • FOMC to stand pat in July, Sept.; 50% odds of Dec. move
    • Fed might hike in Dec. if labor mkt recovers, estimates of GDP remain ~2%, financial conditions ease
    • Story link
  • Stifel (Lindsey Piegza)
    • Fed “has no other option but to remain on sidelines”
    • Uncertainty, volatility from Brexit takes any near-term hike “off the table”
    • Story link
  • Warburg (Carsten Klude)
    • Fed may lower rates if Brexit-fueled volatility lasts
    • Lowering of rates may occur before autumn if equity mkts experience sustained turbulence
    • Story link
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Rob Carnell (ING Groep NV)
Carsten Klude (Mm Warburg Investment Research)
Cliff Tan (Bank of Tokyo-Mitsubishi UFJ Ltd/The)
Ethan Harris (Bank of America Corp)
Lindsey Piegza (Stifel Financial Corp)

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