Tyler Durden: The data, according to many analysts, have been broadly supportive, with stronger growth and a tightening in the labor market that should allow the Fed to be “reasonably confident” that inflation will gradually return to target.
That said, heightened global risks could lead to a tactical delay. Economists remain evenly split on the prospect of the first rate increase in 9 years.
Fed fund futures price 30% odds of move this mo. and more than 50% chance in Dec.
Barclays (Michael Gapen, Rob Martin, Blerina Uruci)
- Fed to stay on hold for now, lift rates in March
- FOMC should delay liftoff as it assesses downside risks to outlook
BMO (Aaron Kohli)
- “Our core view remains that liftoff is a 2015 event”
- Whether Fed hikes or not is less important than impact of their “net communication” on mkts; “real question” is whether communication eases or tightens conditions
BNP (economists)
- FOMC to give dovish projections at this mtg, delay liftoff
- Yellen to reiterate action later this yr
BoT-Mit (Chris Rupkey)
- Fed should be “propelled into action” at this mtg
- U.S. economy remains on track for Fed to raise rates
Brean (Russ Certo)
- Fed may be ready for rate hike, not mkts
Credit Agricole (David Keeble)
- Fed Sept. mtg is “very live,” yet may lead to delay in liftoff
Credit Suisse (research analysts)
- FOMC won’t hike in Sept., may hint at Oct. or Dec.
- Timing largely contingent on global conditions/financial mkt volatility
DB (Joseph LaVorgna, Brett Ryan, Aditya Bhave)
- FOMC likely to say prudent course is “to do nothing,” favor waiting to see how economic/financial “landscape” evolve before Oct. mtg
FTN (Chris Low)
- Fed will choose to raise rates now; officials will agree 25bps is no “big deal one way or the other”
Jefferies (Ward McCarthy, Thomas Simons)
- Fed will make modest changes to statement, mostly on economic/labor mkt assessment; both should be more optimistic than in July
- 2015 median dot should decline to 0.375%, suggesting just 1 hike before end of yr
- Fed will also announce press conferences after each mtg until liftoff
JPM (Michael Feroli)
- Sept. mtg “very close call,” odds tilt toward liftoff
Macquarie (Nizam Idris)
- FOMC increase of 12.5bps can’t be ruled out
MFR (Josh Shapiro)
- Odds are slightly higher of liftoff in Oct. than now
- FOMC statement should hint “strongly at such a move”
Mizuho (Steven Ricchiuto)
- Fed may not get conditions needed to hike until 2H 2016
Nomura (George Goncalves)
- Fed will probably skip liftoff Thursday
- Officials to say conditions aren’t right to hike
Pimco (Harley Bassman)
- Fed needs to “remove Hamlet’s cape,” hike now
- Policy makers have all information they need to act now
RBC (Tom Porcelli, Jacob Oubina, Michael Cloherty, Dan Grubert)
- Fed, to liftoff, would likely want to nudge mkt odds higher
- Less than 50% odds, coupled with no new guidance before FOMC mtg, means RBC will have to mark down its own odds of Sept. liftoff
Renaissance (Neil Dutta)
- Fed most likely to pass on rate increase Thursday; odds of move are 50%
Sberbank (Tom Levinson)
- “We narrowly favor a hike,” with Fed trying to turn volatile mkt conditions to its advantage
- Liftoff now may subdue anxiety, signal confidence, improve risk sentiment in 4Q
Scotiabank’s Guy Haselmann
- FOMC needs to rip “band aid off,” hike already
- Uncertainty around liftoff has made mkts “untradeable and wildly volatile”
Societe Generale (strategists)
- Minimal liftoff could bring relief
- Fed rate increase would deliver positive signal on U.S. economy, remove uncertainty
TD (Millan Mulraine)
- Fed to err on side of caution, take pass on liftoff for now
- Dots will reflect slower pace of stimulus withdrawal, lower terminal rate once liftoff begins
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