Daly: Markets Ahead Of Themselves Expecting Cuts Next Year

• Daly (’24 voter) builds on her comments from yesterday (work on inflation “nowhere near almost done”) by more explicitly adding that 3.4% is a really reasonable place to get to by year-end whilst the markets are ahead of themselves in expecting rate cuts next year.
• The latter goes to what Evans ('23 voter) implied yesterday with his view that 3.75-4% by 2Q23 is sufficiently high, compared to a currently implied peak of 3.5% even after the recent surges higher.
• Daly's latest comments don’t add to the 64bp already priced for the Sept FOMC after the ISM Services beat earlier, with equally limited move in front end Tsys.

Further Bloomberg headlines:

• DALY: NOT EVERY HIKE IS INTO RESTRICTIVE TERRITORY
• DALY: WE'RE NOT EVEN UP TO NEUTRAL RIGHT NOW
• DALY: ESTIMATE OF NEUTRAL RATE IS LITTLE OVER 3%, MAYBE 3.1%
• DALY: WON'T BRING RATES DOWN IN JUST A FEW MONTHS
• DALY: BRING RATES UP TO LONGER THAN 6 MONTHS, MAYBE A YEAR
• DALY: WE'RE DELIVERING ON 2% [inflation] HOPEFULLY BY LATE '23, EARLY '24