Bank of America are forecasting a June rate cut from the Federal Open Market Committee (FOMC), saying they expect that the January topside surprise was a ‘blip’:
- CPI report reinforces the Fed’s concern that core
services inflation will remain sticky because of a tight labour
market. - In our view, a March cut is now firmly off the table and the
chances of a May cut have significantly reduced. - But we remain
comfortable with our call for rate cuts to begin in June. - While risks
are now obviously skewed toward a delay, there will be four more CPI
prints before the June decision, which leaves plenty of time to
re-establish the disinflation narrative if (as we expect) the January
inflation data prove to be a blip rather than the start of a new
trend.
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The turn around on Wednesday shows there are a lot thinking what BoA are thinking:
Powell apparently concurs:
This article was written by Eamonn Sheridan at www.forexlive.com. Source