Bank of America Merrill Lynch Research now believes that the risk / reward around a June hike appear much more balanced.
In addition, BofAML expects that the Fed will provide more guidance over coming weeks about the near-term outlook for the Fed rate outlook.
"Our prior analysis has shown that the Fed has never hiked rates unless the market was pricing in at least 60% chance of such a move the day before the meeting and has most often hiked rates when the market was pricing in at least an 80% or greater chance. This has certainly been the case over the past three Fed rate hikes when the Fed actively worked to shift market pricing closer to this target," BofAML adds.
In line with this view, BofAML now expects that the Fed will likely come out over the next several weeks and guide the market in-line with its thinking so as to avoid surprising the market if the decide to raise rate or to hold steady and shift market probabilities to be more in-line with their anticipated policy action.
Source: Bank of America Merrill Lynch Rates and Currencies ResearchOriginal Article
