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Data Sees Modest Hawkish Move In Fed Pricing, Just Under 100bp Of Cuts Priced Through Year End

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The short end trades in a similar fashion to Tsys, seeing a modest hawkish reaction to the PCE data suite, seemingly driven by slightly firmer-than-expected personal income data.

  • That leaves Fed Funds futures pricing ~32bp of cuts for next month’s FOMC & 98bp of cumulative easing through the Dec decision.
  • That compares to ~33bp and ~100bp heading into the data.
  • The lack of meaningful deviation in the data vs. wider expectations explains the limited move in markets (see our Tsy comment and data analysis bullets for greater colour there).
  • Next week’s labor market data is set to be of far greater importance, given the increased Fed focus on that side of its mandate.
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The short end trades in a similar fashion to Tsys, seeing a modest hawkish reaction to the PCE data suite, seemingly driven by slightly firmer-than-expected personal income data.

  • That leaves Fed Funds futures pricing ~32bp of cuts for next month’s FOMC & 98bp of cumulative easing through the Dec decision.
  • That compares to ~33bp and ~100bp heading into the data.
  • The lack of meaningful deviation in the data vs. wider expectations explains the limited move in markets (see our Tsy comment and data analysis bullets for greater colour there).
  • Next week’s labor market data is set to be of far greater importance, given the increased Fed focus on that side of its mandate.