BoA analysis suggests 50bp Fed rate cut in July. But no, Fed will delay until September.

Author: Eamonn Sheridan | Category: Central Banks

You know what its like, your analysis is telling you one thing but you go all like 'Nah, that won't happen' … 

Bank of America / Merrill Lynch research, cites the historical slope of the 1 month to 6 month Fed Funds futures
  • history of this spread back to 1989 suggests the market has never priced an amount of inversion equal to today's levels without the Fed cutting
  • suggests Fed could be cutting in a month
  • Fed typically cuts 50bps in the first month of an easing cycle
And then the 'but, no':
  • Fed would only consider easing in current environment to combat a slowdown
  • Fed has generally pushed back against idea of a pre-emptive cut to support inflation
  • Fed most likely to cut in September 
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