Bank of America Global Research discusses its expectations for tomorrow's FOMC policy decision.

"In our view, the Fed will increase the target range for the federal funds rate by 25bp to 5.0-5.25% at the May meeting and conclude its current tightening cycle. This outcome would align with our assessment of the US outlook, but, more importantly, it appears consistent with Fed communications since the conclusion of the March FOMC meeting. We expect no change to the Fed’s balance sheet policies," BofA notes. 

"We expect the committee to send the message that it believes monetary policy is in the vicinity of being sufficiently restrictive, but further policy rate hikes cannot be fully ruled out. In our view, the FOMC statement is likely to say, “some additional policy firming may yet be appropriate”. This would send the signal that the committee will keep its options open after the May meeting should incoming data suggest further tightening is required. A hike in June cannot be ruled out given that the Fed will see two employment reports and another inflation report between the May and June FOMC meetings," BofA adds.