STIR
STIR markets within the $-bloc have softened after Fed Chair Powell and yesterday’s FOMC delivered a message that was less hawkish than feared. Over the past week, however, the NZ market has seen the biggest softening on the back of a weaker-than-expected Q1 Employment Report. The Canadian market has actually seen year-end official rate expectations over the past week.
- A “Higher for Longer” message was conveyed but the market focused on Powell’s comment in the press conference that "I think it's unlikely that the next policy rate move will be a hike".
- The key addition to this statement compared to March’s was "So far this year, the data have not given us that greater confidence. In particular, and as I noted earlier, readings on inflation have come in above expectations. It is likely that gaining such greater confidence will take longer than previously expected."
- And the next sentence, "We are prepared to maintain the current target range for" used to conclude "longer, if appropriate" - now it ends "as long as appropriate".
- Elsewhere, Bank of Canada Governor Tiff Macklem told lawmakers Wednesday that conditions for lowering interest rates are emerging but he's still looking for solid evidence that trend inflation is settling back to his 2% target. (see MNI link)
- December 2024 expectations and the cumulative easing across the $-bloc stand at: 4.97%, -36bps (FOMC); 4.51%, -49bps (BoC); 4.41%, -4bps from an expected terminal rate of 4.45% (RBA); and 5.12%, -39bps (RBNZ).
Figure 1: $-Bloc STIR (%)
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