Tuesday, July 5, 2016
The changing perception on short-rate and central bank action
We have been members of the "one and done" school of Fed action for 2016, but I don't think anyone could have anticipated the change in market perception in the last week. There was a clear consensus that the Fed would raise rates during the year, but by the end of March the view was at best a coin flip for the end of the year or early 2017. Now, post-BREXIT, the chance is only 2% between July and December and less than 10% for December or February. Fed action is now off the table.