And BMO analysts said should US....>

US TSYS/RESEARCH: And BMO analysts said should US inflation next year "return to

more normal levels (0.14% to 0.20% monthly gains), the FOMC will emerge from

lowflation as monetary policy gurus who were ahead of the inflation curve, a

nice place for Yellen to end her term as Chair."

- They add that "while that might keep the Fed's quarterly hike schedule in

place, it won't lead the mkt to assume any acceleration of the 'planned'

rate-hikes, if for no other reason than the SEP forecasts are based on core-PCE

reaching +1.9% by year-end and already have three hikes slated."

- "The most relevant risk to our flattening bias and rates outlook comes from a

spike of inflation beyond the norms that the FOMC is unwilling or unable to

adequately address," they said. "Over the last 3 decades, the Fed has proven to

be a very credible inflation fighter, while disinflation has been far more

challenging. The implication of this fact is that if realized inflation picks

up, that will only further the flattening bias unless the Fed signals a material

change to its response function."