Fed/BOE previews

The focus this morning has been on the emergency ECB meeting, but we also have a couple more big central bank meetings coming up:

• We put out an update to our Fed preview yesterday, following the WSJ/CNBC stories that led the market to price 90+% probability of a 75bp hike. The Fed is likely to deliver just that on Wednesday. The Statement will incorporate stronger hawkish language in order to justify the surprise acceleration in the hike pace. June’s Dot Plot will become much more hawkish vs March’s and vs what was expected prior to a 75bp hike becoming consensus. But the outlined rate path will probably fall short of current market pricing. The full MNI Fed Preview Update is available here.
• We also published our BOE Preview yesterday. A 25bp hike is fully priced for this week’s MPC meeting, with markets pricing in around a 1/3 probability that the Bank of England vote for a larger 50bp hike. Market pricing for August has increased even more significantly, with markets now pricing in around 79bp of hikes (i.e. fully pricing a 50bp hike in one of the next two MPC meetings). This is up around 25bp since the aftermath of the May MPC meeting with around half of that move coming since last week’s ECB meeting and higher-than-expected US CPI report. We think that there is likely to be enough support for most (or “the majority”) of members to continue with the previous forward guidance for this month at least. The full MNI BOE Preview is available here.