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Takeaway: The BoJ underwhelmed but suggests incremental easing on the horizon. Meanwhile, Fed stands pat but raises specter of December rate hike.

Editor's Note: Below is a brief excerpt from an institutional research note written by Hedgeye Senior Macro analyst Darius Dale. To access our institutional research email sales@hedgeye.com. For more on the subject of central planning check out analysis via Hedgeye CEO Keith McCullough here and Dale here.

5 Key Takeaways: What You Need To Know About Fed & BoJ Statements - central bank kool aid 06.09.2016

  1. While the BoJ underwhelmed near-term easing expectations in the most confounding of manners, a detailed review of their policy statement in the context of preexisting cyclical and structural growth and inflation dynamics suggests incremental easing is likely to come in the not-too-distant future.
  2. Looking beyond the immediate-term TRADE duration, it’s safe to conclude that the potential for a protracted JGB “tantrum” has been dramatically reduced and the key implication of dramatically-reduced JGB “tantrum” risk is reduced upward pressure on U.S. interest rates.
  3. With respect to the Fed, if it looks like a dove, walks like a dove and coos like a dove – it’s probably a dove. Looking beyond the [likely] December rate hike guidance inserted into today’s FOMC statement, both the Summary Economic Projections and Yellen press conference offered a slew of dovish takeaways.
  4. Moreover, the confluence of their ongoing “data dependence” and our dour outlook for the U.S. economy and the labor market imply the 10Y Treasury yield’s intraday high of 1.73% may represent the peak of 2016 rate hike fears.
  5. All told, we reiterate our bullish bias on Treasury bonds and defensive (i.e. non-cyclical) dividend yields in the context of our “lower-for-longer” and #LateCycle slowdown themes, having likely just survived yet another round of [largely ungrounded] consensus fear of higher rates.