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Focus on Fed, but New Inputs for BOJ and ECB
The market is generally expecting a dovish FOMC statement. We have argued that it will most likely be little changed, except for modification relating to the asset purchases. Keen interest will be on its references to inflation. While the breakeven rates have fallen, the 5-year/5-year forward which the Fed seems to prefer as a measures of inflation expectations is little changed. This may be largely explained by looking at relative liquidity. The preferred inflation measure core PCE deflator may remain firm due to housing costs, even if the headline measures of inflation ease due to the sharp drop in energy prices ... (full story)