BoA Merrill Lynch expect the Federal Reserve to stay 'data dependent' and give no signal on timing
- Meeting is "unlikely to result in any policy changes"
- Do not expect the Fed to give any signals about September or subsequent meetings
- Will maintain "its data dependent approach to a gradual hiking cycle"
- Have a base case of a more optimistic tone to the July statement
- But more substantive language changes are unlikely
The bank expect the next hike to come in December
- "but a September move cannot be completely ruled out"
For a hike in September:
- US activity data would need to remain solid
- Inflation indicators would need to point higher
- Global risk would have to calm
Boa ML conclude that the biggest risk to market pricing will come not from this week's statement, but from the minutes in three weeks' time
- Recall the sharp market reaction when the April minutes revealed significant support on the FOMC for a possible June rate hike. There is the potential for a similarly surprising amount of FOMC interest in a September hike this time around.
