BoA/Merrill Lynch preview of the Federal Reserve's FOMC meeting this week - announcement due at 1800GMT on Wednesday 20 April 2015.

In brief (bolding is mine):

  • At the March FOMC meeting, the Fed took any policy changes in April off the table. We don't expect similar language about June policy at the April meeting.
  • We do expect a more somber description of recent activity.
  • This dovish shift in the near term view should translate into significantly lower odds of a June rate hike in our view.
  • But any market participants who seek an explicit signal that June also is off the table are likely to be disappointed: the FOMC will want to maintain as much policy flexibility as possible.
  • Without a press conference or updated projections in April, the FOMC statement will be the focus.
  • The main change is likely to be an acknowledgment of the broadly weaker data for consumption, manufacturing and the labor market in recent months.
  • The Committee may suggest temporary factors (i.e., weather and the West Coast port shutdown) account for much of the 1Q slowdown and thus leave the medium term outlook unchanged.
  • Meanwhile, the recent firming of core inflation measures may give the FOMC more confidence that downside inflation risks - which rose in the March SEP - have faded.
  • As such, we look for no significant changes in the inflation outlook, although we continue to believe the Fed is under-estimating the persistence of global disinflationary forces.
  • The March statement dropped "patient," which had been generally interpreted to mean no rate hikes for the current and subsequent meeting, in order to have more flexibility for setting policy at the June meeting and beyond. To make certain the markets didn't misinterpret the change in guidance as a sign of imminent liftoff, the FOMC stated that an April rate hike remained "unlikely" and that dropping "patient" did not mean the FOMC had decided on the timing of liftoff. As these clarifications are no longer needed, we expect they will be dropped.

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I had earlier previews here:

  • The Federal Reserve's FOMC meeting April 28 and 29 - don't ignore it ... risk re lift-off
  • UBS and BNP on what to expect
  • Preview of the FOMC from JP Morgan