Fed Funds Peak Pricing Edges To Fresh Post-May High

With European central banks tightening this morning (SNB and Norges, with BoE up shortly), Fed terminal Funds rate pricing has edged 1.6bp higher in early Thursday trade, implying a full 25bp hike by November (to a 5.25-5.50% target range).

• It's still early of course but a close at current levels would mark the largest single-day gain in Fed terminal rates since June 7th, to the highest level since May (chart below shows market-implied midpoint of Fed funds range - terminal moved higher than current levels Weds but the move faded by the close).
• At that time, a peak in rates in July was priced 1bp above current levels - now November is seen as the peak.
• The current path includes 18bp implied for July (>70% prob of a 25bp hike), 22bp cumulative through July. End-year rates are 18bp above current levels.
• On that front, Fed communications will be eyed today, particularly any hawkish commentary from Mester and Bowman (we'd expect Powell to be a non-market mover, in keeping with most 2nd day congressional hearings).
• Late Wednesday MNI published an interview with Atlanta Fed's Bostic where he signalled a preference not to hike further and hold rates through 2024, though he pushed back against the use of the term "pause" and said he was "very open on what's happening" at future meetings. (In contrast, Fed Funds Futures imply 145bp of cuts next year.)

Implied Midpoint Of Fed 0.25bp Target RangeSource: BBG, MNI