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Minutes: Mizuho And Credit Suisse Looking For Debate Over Hike Base Case

FED
  • Mizuho on tomorrow's FOMC minutes release: "The key question for the market is whether the Chairman’s more temperate post-meeting tone reflects a narrow or broad consensus of Committee members", specifically re 2 x 50bp hikes in June and July with a reassessment once the Funds rate gets to 2%. This compares with the hawks led by Bullard who are pushing to a 3.0-3.5% Funds rate by year-end, potentially cutting in 2023 if required.
  • "This debate is expected to be in the May minutes, as it has become clear the Committee may have been unanimous in hiking rates by 50 basis points but uncertainty remains over how fast the Fed should push the tightening cycle."
  • Credit Suisse: "expect the minutes to show officials preferred front-loading rate hikes to get policy to neutral by year-end before reevaluating their stance. The minutes should show that officials would keep tightening policy until they see clear evidence of slower inflation, and won’t hesitate to raise rates above neutral even if it meant a somewhat higher unemployment rate."
  • The minutes will show the base case is 2 more 50bp hikes "with the future path of policy dependent on inflation developments. If they see clear and convincing evidence of slower inflation, they’ll likely switch to 25bp rate hikes. If inflation does not abate, the committee could be more aggressive in raising rates above estimates of neutral."
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