All eyes on Federal Open Market Committee
THE phrase "behind the curve" has cropped up in recent discussions about this week's US Federal Open Market Committee (FOMC) meeting where a 25 basis-point interest rate hike is virtually assured.
Bank of America-Merrill Lynch, for example, in its March 9 Liquid Insight, said that despite the 60 per cent Fed hike probabilities going from 40 per cent to 100 per cent in the past fortnight, stocks are higher, credit spreads are tighter, and interest rate volatility and the VIX Index - which measures the options market's estimate of future - volatility are lower.
"While this has allowed the Fed to have its cake and eat it too at the March meeting, in our view, there could be a bigger sign from the markets to the Fed: financial conditions could be at the cusp of signalling that policy is behind the curve," said BOA-ML.
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