Citigroup said the Federal Reserve may not increase rates soon despite the pickup in the economic activity.
"We believe that despite the recent pickup, the pace of activity remains too slow to persuade Chair Janet Yellen and the doves that they should resume rate increases soon. They want to continue to maximize employment with monetary stimulus because inflation likely will remain contained," analyst William Lee wrote in a note.
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Lee expects the first paragraph of the July FOMC statement (discussing economic conditions) to reflect improved labor markets, but continue to call for watchful waiting. Lee said Yellen likely will wait until her August Jackson Hole speech to hint at any shift in policy.
"Despite divisions within the FOMC, we believe there remains potential for a December rate hike if the labor market and growth data hold up, inflation shows that it continues to rise as expected," Lee noted.
For a September rate hike to be realistic, the analyst believes the Committee would require a very unlikely but significant jump in the inflation rate. For example, CPI inflation rising above 2½ percent year-over-year for the August and September prints, with accompanying sharp and sustained increases in growth and employment.
27% profit every 20 days?
This is what Nic Chahine averages with his option buys. Not selling covered calls or spreads… BUYING options. Most traders don’t even have a winning percentage of 27% buying options. He has an 83% win rate. Here’s how he does it.