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Back Nearly Pricing In A First Fed Cut In June

  • Fed Funds implied are marginally off session lows to hold a large rally on the softer than expected ISM mfg, a more sustained, and larger move than the earlier brief push lower on renewed NYCB spillover.
  • We are back to almost fully pricing in a first cut in June vs July and with now 93bp of cuts for 2024 vs 78bps before yesterday’s PCE and jobless claims data.
  • Cumulative cuts: 1bp Mar, 7bp May, 24bp Jun, 40bp Jul and 93bp Dec.
  • Today’s Fedspeak has so far been somewhat of an anti-climax, keeping to previously touched themes for each speaker. Barkin (’24) did add though that we shouldn’t look too closely at the January inflation data (which included the shorter-term acceleration in core PCE yesterday which Goolsbee has been keen to fade), having previously focused on the labor market when it came to January data concerns.
  • Gov Kugler is up next at 1520ET on the dual mandate including prepared remarks. In her first appearance since her appointment in Sept on Feb 7, she thought it may be appropriate to cut rates “at some point”, noting that wage growth is moderating with firms adjusting prices less which she wants to see a sustained decline in services inflation. Chair Powell's congressional appearances Wed/Thu next week sit on the horizon, followed of course by payrolls on Fri.

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