Fed to Hike in June?
Articles highlighting strength in the U.S. economy have mushroomed in the past month, supporting a scenario of the first Federal Reserve rate hike in June, according to Société Générale.
The investment bank has its own monthly newsflow indicators that count the number of newspaper articles, highlighting themes of economic strength.
Historically, these indicators have proven highly sensitive to financial asset pricing, SocGen said. The indicators often lead trends by a few months, SocGen noted.
The U.S. newsflow indicator has bottomed out after several months. This should make the Fed more confident about a June move, according to the bank.
SocGen’s global newsflow indicators have also moved higher.
This undercuts the argument that the global economic weakness should keep the Fed on hold.
In January, the Fed flagged international developments in its policy statement as a reason to stay patient about raising rates.
Société Générale said it now expects the Fed to remove the word patient from its forward guidance at its policy meeting next week.