December 17, 2024 20:02 GMT
STIR: December 25bp Cut Pricing Remains Well Anchored
STIR
Fed cut pricing through January is unchanged Tuesday, ahead of Wednesday's very likely (95+% futures-priced) 25bp cut to the Fed funds rate.
- This is not without some intraday volatility, with end-2025 cumulative pricing pulled back temporarily by 4bp (to 69bp) in European morning trading hours, largely in sympathy with a significant hawkish move in the UK STIR strip after strong UK wage data ahead of Thursday's Bank of England decision.
- However, the overnight move in Fed funds futures has reversed after solid US retail sales data, with just 1bp added to the expected 2025 cut profile.
- The next full 25bp rate cut beyond December is priced for June 2025, with the 3.85% by end-2025 representing a 73bp cumulative drop from here, so just under 3x 25bp cuts including this week. That's on the hawkish side of this week's likely new Dot Plot (expectations are for the 2025 rate median to be pared to 75bp from 100bp in the previous edition).
- At the margins, a 5bp adjustment to ON RRP that is largely but not completely expected this week could be exaggerating the degree of envisaged cuts, but probably only by 1 to 3bp.
| Meeting | Current FF Implieds (%), LH | Cumulative Change From Current Rate (bp) | Incremental Chg (bp) | Prior Session (Dec 16) | Chg Since Then (bp) |
| Dec 18 2024 | 4.34 | -24.0 | -24.1 | 4.34 | 0.0 |
| Jan 29 2025 | 4.30 | -28.2 | -4.2 | 4.30 | 0.0 |
| Mar 19 2025 | 4.17 | -41.2 | -13.0 | 4.17 | -0.6 |
| May 07 2025 | 4.11 | -47.1 | -5.9 | 4.11 | 0.0 |
| Jun 18 2025 | 4.01 | -57.1 | -10.0 | 4.02 | -0.9 |
| Jul 30 2025 | 3.97 | -61.3 | -4.2 | 3.98 | -1.1 |
| Sep 17 2025 | 3.91 | -67.0 | -5.7 | 3.92 | -1.0 |
| Oct 29 2025 | 3.88 | -70.2 | -3.2 | 3.89 | -1.0 |
| Dec 10 2025 | 3.85 | -73.0 | -2.8 | 3.86 | -1.2 |
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