Unconvinced
Investor expectations regarding central bank action has remained decidedly dovish over the past several weeks, with the odds of a Fed rate hike generally fading. There has been little change in the commentary from the other major central banks, so the broad expectation if that there is further accommodation on the way from the likes of the BOE, ECB and BOJ. Of course the form that this takes is of infinite importance, although the markets seem happy simply with the concept that more is coming. As for the Fed, investors have been skeptical over the Fed’s “official” path of rate hikes since it raised rates almost eight months ago. Way back then, investors hardly gave the Fed credit with its ability to raise rates four times as published, instead cutting that estimate by one-half. Various bouts of global volatility, unexpected weakness in data and Brexit have moved rate hike expectations all over the map, with the next move pushed out to 2018 at one point during spring. More recently, calm markets and improving data have pushed Fed officials to try and maintain its optionality by discussing its willingness and ability to hike into the remainder of the year. In particular, NY Fed President Dudley made the following statements yesterday:
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