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    FOMC Preview: Dead but not lifeless - Rabobank Sandeep Kanihama

    Philip Marey, Senior US Strategist at Rabobank, suggests that today’s meeting of the FOMC (June 14-15) can hardly be called ‘live’ anymore, as the devastating Employment Report for May took a June hike off the table.Key Quotes“After the Fed had finally convinced the markets that it was serious about hiking in June/July, the markets are now again pricing in at most one hike this year and not before December (50.1% priced in according to fed funds futures). So if the Fed wants to hike earlier, it will have another communications challenge to overcome.On the bright side, the Committee will not have to take the risk of Brexit into account once it feels ready to hike again, because by then the outcome of the referendum will be known. However, they may have to deal with the consequences of the vote nevertheless. Obviously, a ‘leave’ vote would have a negative impact on the US economy, both through international trade and financial markets.While the FOMC is not expected to change rates this week, they will provide us with an update of their economic projections, which include the dot plot. This will give us an idea whether there is still widespread support in the Committee for two hikes before the end of the year.What’s more, Fed Chair Janet Yellen will give a post-meeting press conference. Perhaps her prepared speech may be more informative about the Fed’s changed plans after the May payrolls than her speech of last week which basically summarized all the uncertainties and risks that the Fed is facing. Otherwise, the Q&A will have to do the job as she will not be able to avoid answering questions about the hiking cycle in that setting.”

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