📝 Possible Pause of Fed Hiking Cycle After July: BofA

A pause at 1.75%-2% could become more likely if financial conditions worsen and data soften, and is consistent with a risk-management approach as downside risks take on a higher weight at normal policy levels. See further 50bps hikes in June and July, recommend receiving Sept. FOMC OIS at 2.13% to position for a possible pause of hiking cycle after July. The contract should settle at 2.08% in the event of a 25bp hike, 2.33% in the event of a 50bp hike.

We put our target at 1.96% which is midway between the pause scenario and the 25bp hike scenario, essentially a 50% probability of a pause. The main risks for this trade would emerge if CPI figures do not ease and wage data comes stronger over the next two months. - BofA Rates Research