Fed Chair Yellen to signal a post-summer rate hike

The upcoming week sees the US FOMC decision and press conference on 17 June. Encouraged by recent solid job-market data and signs of stronger wage growth, Fed Chair Yellen is expected to signal a rate hike is coming after the summer, supporting our long-held view of a September hike. 

However, Yellen will play down the subsequent rate hiking path, emphasising gradualism and data-dependence. This could also be echoed by falling 'dots' (the predictions of the federal funds rate by FOMC participants), moving closer to market pricing, particularly over the longer term on more downbeat views about potential growth and productivity. 

CPI data are likely to show inflation having troughed y/y as energy prices recover, further boosting the Fed's confidence over the summer that inflation is on a firmer footing.