$-Bloc Year-End Easing Expectations Are Sharply Softer, Except For AUS, After FOMC Meeting

Following yesterday's FOMC Decision, STIR markets across the $-bloc, except for Australia, have seen a notable reduction in official rate expectations for year-end over the past week.

• As anticipated, the Fed Funds rate target range remained unchanged at 5.25-5.5%. However, revisions to the Fed funds path, as well as on the economy and inflation, were all hawkish.
• Despite this, the dot plot still indicates three expected rate cuts this year, while the number of expected cuts for 2025 was reduced from four to three.
• Furthermore, Fed Chair Powell emphasised that "the story is the same one," suggesting that rate cuts are still on the table, and the Fed remains confident in achieving its objectives over time.
• In contrast, the Australian market stands out as an outlier, with expected official rates remaining virtually unchanged over the past week, following a much stronger-than-expected February Employment Report. RBA-dated OIS rates are 6-9 basis points firmer for meetings beyond August after the data and 4-5 basis points firmer on the day.
• December 2024 expectations and the cumulative easing across the $-bloc stand at: 4.47%, -86bps (FOMC); 4.25%, -75bps (BOC); 3.93%, -39bps (RBA); and 4.80%, -70bps (RBNZ).

Figure 1: $-Bloc STIR (%)

Source: MNI – Market News / Bloomberg