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BANK OF AMERICA WARNS FED COULD DELIVER 50BPS HIKE IN DECEMBER
Bank of America says October's hot CPI report virtually guarantees a December Fed rate hike β and opens the door to a larger 50bps move.
Headline CPI rose 0.4%, while core CPI climbed 0.3%, marking a third consecutive upside inflation surprise. BofA now estimates core PCE inflation at 3.3% YoY.
Price pressures are spreading across goods and services, with electronics, airfares and hotels driving increases.
BofA still expects 25bps in December, but sees growing risk of another hike in January rather than March.
The bank warns the Fed is falling behind inflation and calls October's decision to hold rates a potential policy mistake.
The latest CPI print has really gotten investors scared and are pricing in a 25bps hike in December and some even calling for a 50bps hike.
The FOMC might not be so quick to raise given how oil prices have come down over the last couple of weeks.
Ultimate we think it comes down to the conflict in Iran that will dictate what the FOMC does in December but there is a chance for a surprise pause.