BoA / Merrill Lynch on the timing question of the next Fed rate hike
- Clear that June is very much on the table
- What is less clear is whether the Fed is just protesting the super-low probability priced into the markets or is setting us up for a June hike
- We are sticking to September
- September still seems most consistent with Yellen's high risk aversion
- June seems a bit early given how dovish she has sounded
- With the market pricing in just a 34% chance of a move, it would shock the markets and bring into question their credibility ... This would draw attention to the competence of the Fed during an election year
- The Fed would also be moving in front of the Brexit vote, a potential serious shock to financial markets
... This is a close call and we will be nimble going forward. Payrolls on June 2nd and a Yellen speech on June 6th could change our mind.
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Interesting comments from ML on July, though:
July is also live, but suffers the usual problem of not having a scheduled press conference
The Fed has made it clear that they can call a press conference on short notice. However, it would still require meticulous preparation from Yellen.
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I reckon that's a good point from ML, and if June is a no, I'd not be discounting July
