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BofA FOMC Review: Focus On "Time"

FED

BofA saw the key focus of the April FOMC as "time": "time to 1) work through the transitory factors driving higher inflation and 2) fully heal the labor market, allowing people to return to the workforce".

  • Powell saw only "little progress" has been made with one strong jobs report; and focus is on the level of employment.
  • Importantly, Powell said that inflation expectations are well anchored ("mandate-consistent levels") and does not expect expectations to rise on temporary drivers.
  • He also noted many labor market issues which in his view "can all be resolved but once again take time."
  • Future action: Fed to set the stage for taper in early 2022. Fed likely forced to raise administered rates at/before June FOMC, with IOER +5bps and ON RRP +2-3bps.
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