BofA: Fed appears to favor dovish over hawkish surprise moves

Economists at Bank of America said in a report responding to client concerns that the Fed's actions have historically tended to be more moderate than expected, avoiding hawkish surprises. "The Fed usually likes to give ample advance notice of any tough signals to avoid unexpectedly exacerbating the financial environment. The Fed seems more willing to surprise in a moderate direction." According to CME data, the market currently expects the probability of a 50 basis point rate cut by the Fed to be 55%, while the probability of a more moderate 25 basis point rate cut is 45%. "Bank of America believes that the Fed is unlikely to implement a tough rate cut, which should support long-term bonds and curve steepening. (Jinshi)