FOMC to be uneventful? - BAML

By FXstreet.com | July 28, 2014 AAA

FXStreet (Guatemala) - Analysts at Bank of America Merrill Lynch explained that the July FOMC meeting is likely to be relatively uneventful on the surface.

Key Quotes:

With no press conference or forecast updates”.

“We expect the discussion will be much more contentious behind the scenes”.

“The statement should see no significant changes in policy or rhetoric, acknowledging some improvement in the data and possibly noting some risks from housing or geopolitical events."

"It also should indicate another US$10bn in tapering, bringing the purchase pace down to US$25bn per month as of August. The minutes (in three weeks' time) are likely to reveal the extent of disagreement among FOMC participants. Thus, we take this opportunity to explore medium-term views around the Fed."

"The disconnect between market pricing and commentary on the Fed remains as wide as ever. As the Chart of the Day shows, the fed funds market remains priced well below all sorts of variations on the Fed's dot plot."

"The market seems to be taking to heart the patient and gradual approach to policy that Fed Chair Janet Yellen and her colleagues have communicated - and then some. In fact, the fed funds futures market curve has on net drifted lower (in yield terms) since the June FOMC meeting."

"Yet some clients increasingly are asking what will lead the Fed to turn more hawkish or to start hiking sooner. In this piece, we address that question by highlighting the three principles of Fed watching: (1) patience is a virtue; (2) risk management favors lower for longer; and (3) watch out for hawkish "Fed fakes.""

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