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Fed Hike Expectations Firm Modestly With ECB Tool Talk

STIR FUTURES
  • Fed Funds implied hikes have firmed slightly through the European morning, with a similar move in ECB-dated OIS following ECB anti-fragmentation talk including Lagarde saying it will aid future rate rises.
  • FOMC-dated hikes sit between 71-72bps for the July meeting before a cumulative 129bp for Sep and 189bp for Dec (four meetings), the latter compared to 164bps of hikes priced for the ECB.
  • Further out, Fed Funds are seen peaking at 3.62% at the Mar’23 meeting before a little over 40bps of cuts priced to the Jan’24 meeting.
  • The only scheduled Fedspeak today is from Daly (’24 voter) at 1230ET, who on Friday saw a 75bp hike on Jul 27 as looking likely but was still data dependent.

Cumulative hikes implied by FOMC-dated Fed Funds futuresSource: Bloomberg

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