FOMC: Markets have priced in a 25 bp hike with near certainty - TDS

Today, all eyes will be on the FOMC in an otherwise quiet session for data as markets have priced in a 25 bp hike with near certainty, leaving the market reaction to hinge on the dots and tone of the statement/press conference, according to analysts at TDS.

Key Quotes

“We expect the median 2018 and LR dots to remain unchanged but see balanced risks overall. An emphasis on hiking beyond neutral would be hawkish while discussion of trade risks of softer global growth serve as dovish risks. We look for Powell to remain tight-lipped at the press conference, consistent with his approach in March.”

“May PPI is the only scheduled data release and the market looks for a 0.3% m/m increase that would see producer inflation rebound to 2.8% y/y after falling to 2.6% in April. Core PPI is expected to post a more modest 0.2% advance.”