BoA - Federal Reserve dovishness is not sustainable, sudden shift could shock markets

Author: Eamonn Sheridan | Category: Central Banks

Bank of America / Merrill Lynch warn there is a risk of both Fed and ECB policy mistakes 

We believe that the Fed's dovish tone is not sustainable

  • getting concerned that a sudden shift could shock markets

BoA couch their concerns in Fed assurances they will not be proactive and will wait for improving data to show, but says BoA:

  • the US economy is already booming, with data (NFP and ISM last week) well above expectations
  • Vaccination is also accelerating even faster than expected

BoA do note though:

  • To be fair, the market is already pricing Fed policy normalization, but our rates strategists believe that the Fed could start later and move faster than markets expect 

I'll post on BoA ECB thoughts separately

ps. Powell's weekend comments were quite sanguine:

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