HALISTER1: Weak Global Economy Still Prevents Fed From Hiking Rates: BofAML

Weak Global Economy Still Prevents Fed From Hiking Rates: BofAML

(Bloomberg) -- Mkt is accurately not expecting a June rate hike, situation is similar to that which led into FOMC’s April mtg, BofAML strategist Hans Mikkelsen writes in note.
  • Prior to FOMC’s April mtg, “relatively hawkish talk” from Fed’s William Dudley, Charles Evans, Eric Rosengren had fueled expectations for a “more hawkish tilting FOMC statement”
    • Instead, statement was more dovish than expected, probability of a June hike decline to 12%
  • Combination of better-than-expected data from CPI/Industrial Production and hawkish talk from other Fed officials has led to mkt implied probability of a June hike to rise to ~14% or more from 4%
    • “Should the market be wrong, we can be looking forward to a difficult adjustment process in the coming weeks”
  • BofAML continues to expect better U.S. data to be positive for credit spreads because weak global economy still prevents Fed from hiking
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Charles Evans (Federal Reserve Bank of Chicago/Il)
William Dudley (Federal Reserve Bank of New York)
Hans Mikkelsen (Bank of America Corp)

Topics
BGOV Finance

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