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Fed Hikes Keeping To Significant Re-Pricing Of Larger Hikes

STIR FUTURES
  • Fed Funds implied hikes have firmed slightly through the European session to sit in the middle of yesterday’s wide ranges, consolidating a significant re-pricing of larger hikes with Fedspeak on terminal rates higher than market pricing and pushing back against rate cuts.
  • Yesterday’s ISM service beat spurred further increases but pricing is now back to where it was prior to the release.
  • There is currently 61bps for the Sept FOMC having yesterday tipped to more than a 50% chance of a 75bp hike, with a cumulative 107bps to year-end and 113bps to the current peak of 3.46% in Mar’23.
  • Implied rates out to end-2023 have increased back to post-US CPI levels but still imply 47bps of cuts.
  • Mester (’22 voter) set to discuss the economic outlook at 1200ET (Q&A with no text) after noting on Tue that inflation hasn’t yet peaked and wants to see compelling evidence of sustained or several months of it cooling.


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  • Fed Funds implied hikes have firmed slightly through the European session to sit in the middle of yesterday’s wide ranges, consolidating a significant re-pricing of larger hikes with Fedspeak on terminal rates higher than market pricing and pushing back against rate cuts.
  • Yesterday’s ISM service beat spurred further increases but pricing is now back to where it was prior to the release.
  • There is currently 61bps for the Sept FOMC having yesterday tipped to more than a 50% chance of a 75bp hike, with a cumulative 107bps to year-end and 113bps to the current peak of 3.46% in Mar’23.
  • Implied rates out to end-2023 have increased back to post-US CPI levels but still imply 47bps of cuts.
  • Mester (’22 voter) set to discuss the economic outlook at 1200ET (Q&A with no text) after noting on Tue that inflation hasn’t yet peaked and wants to see compelling evidence of sustained or several months of it cooling.