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FED VIEWS ARE DIVERGING. CITI, BOFA CALLS NOW 150 BPS APART

Everyone likes to moan about sell-side researchers herding, but we've now got a good range of calls for the Federal Reserve's policy path.

BofA on Monday changed their Fed view and now expect three 25-basis point rate hikes this year. They argue that core PCE could reach 3.5% in May, nearly 70 bps higher than it was a year ago while the unemployment rate is unchanged.

Since there was 75 bps of easing at the end of last year, BofA think the Fed will reverse that.

Citi are firmly in the opposite camp. They expect 75 bps of easing, and argue inflation will slow -- particularly due to lower oil prices -- and that softer U.S. labour market data will come over the summer.

Market pricing is in the middle, but much closer to BofA than Citi. LSEG data shows traders are pricing 42 bps of Fed tightening this year, with one hike likely by September and around a two-in-three chance of a second by year end. 0#USDIRPR

New Fed Chair Kevin Warsh might be pleased by the range of views. His first meeting last week came with a stripped-down monetary policy statement.

He also said financial ​markets should price securities based on their own reading of the economy rather than trying to anticipate policymakers' views of the data.

(Alun John )

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