Wunderlich Securities: June FOMC Rate Hike Not Off The Table
Wunderlich Securities parsed the FOMC’s latest statement and their conclusion: the market is not adequately pricing in the probability of a June rate hike. Critically, Wunderlich notes that the voting members of the committee changed from December to January, making the FOMC a bit more dovish. However, Wunderlich said that after looking at the latest statement and economic conditions, the Fed could still begin the process of rate normalization in June.
Specifically, Wunderlich believes the Fed’s move will be spurred into action by better economic developments – instead of a need to normalize policy just for the sake of giving itself more room to navigate a future slowdown. The “unexpected message” from the FOMC in January was that in the medium term, the committee believes that inflation will trend to 2 percent - pushing the FOMC to act.
Wunderlich did mention that monetary policy is unlikely to tighten sharply, though rates this year could rise above 50 basis points.
The iShares Barclays 20+ Yr Treas.Bond ETF (NYSE: TLT) is near its highs after gaining 35 percent since January 2014.
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