The Research Team at Bank of America Merrill Lynch (BAML) is out with its expectations of the FOMC monetary policy decision in the coming months.
“History of this spread back to 1989 suggests the market has never priced an amount of inversion equal to today’s levels without the Fed cutting.
Suggests Fed could be cutting in a month.
Fed typically cuts 50bps in the first month of an easing cycle.
Fed would only consider easing in current environment to combat a slowdown.
Fed has generally pushed back against idea of a pre-emptive cut to support inflation.
Fed most likely to cut rates in September. “