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Fed Hikes Consolidate Yesterday's Surge

STIR FUTURES
  • Fed Funds implied hikes have consolidated yesterday’s surge higher, with a 61bp hike priced for the Sept FOMC before a cumulative 91.5bp for Nov and 105bps over the three meetings to Dec.
  • A peak is pushed out to Feb/Mar’23 meetings with 109bps of hikes to an implied 3.425% whilst yesterday’s larger increase s further out in 2023 seeing priced inversion trimmed from 60bps of cuts to 44bps currently.
  • Bullard late yesterday repeated he wants a policy rate at 3.75-4% by year-end whilst noting that a soft landing doesn’t require gradualism. It didn’t move the needle from earlier comments by Daly (nowhere near done), Evans (3.75-4% rate by 2Q23 is sufficiently high) or Mester (haven’t seen inflation peak yet, prices only cooling if you squint).
  • Further heavy Fedspeak schedule with repeat Bullard (’22) at 0730ET, Harker (’23) at 1030ET, Daly (’24) at 1115ET, Barkin (’24) at 1145ET and Kashkari (’23) at 1430ET.

FOMC-dated Fed Funds implied rate for Sep (white), Dec (yellow) and Dec'23-Dec'22 spread (green)Source: Bloomberg

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