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To Hike Or Not To Hike (Fed, Economists, & Market Divided)

No matter what, it's going to be a close-call...

Fed members notably split

 

And investors’ conviction of rate hikes in 2015 has been drifting...

 

Market pricing of the timing of lift-off has fluctuated in a wide range this year:

  • Market has priced 20-100% hike odds by Sept.
  • Odds of 2015 hike fluctuated between 50-100%

Key data releases have led to big shifts in market pricing as Fed emphasised data dependence

  • Strong January employment data led markets to fully price hike by September
  • Dovish March and June FOMC meetings led to lower odds of a hike this year

Current market pricing suggests 30% odds of a hike in September and 75% chance of lift-off this year

Low market pricing likely lowers chances of a hike in September

  • Fed would like to avoid surprising the market
  • Hiking against market expectations in September means greater volatility and more tightening of financial conditions than desired

Economisseds remain split...

 

But then again - they have been clueless...

 

And as Ransquawk notes, the various banks are also split down the middle on whether The fed should hike or not next week...

NO HIKE: BarCap, BNP, Credit Ag, Credit Suisse, HSBC, GS

 

HIKE: BoFA, Deutsche Bank, JPM, RBS, Wells Fargo

Here's why Deutsche Bank thinks they should raise rates in September...

*  *  *

Finally, this is the most important chart for the next few days...

h/t @Not_Jim_Cramer

 

Simply put - The more you buy stocks, the higher the probability of a turmoil-creating rate-hike next week - that's the Dow-Data-Dependent Fed at work folks!!