A team of strategists at BAML said the Fed should surprise the markets
by Joseph Adinolfi
When it comes to the tricky task of raising interest rates, the Federal Reserve likes to prep investors before pulling the ripcord. It sees this as a way to prevent markets from reacting violently to unexpected news.
But this approach failed in December, when a well-telegraphed rate hike was followed by weeks of extreme volatility.
On Friday, a team of currency and interest-rate strategists at Bank of America Merill Lynch suggested that it might be time for a new approach.
After studying Fed-funds futures data, the strategists discerned that the Fed has typically provided investors with plenty of warning before raising rates.