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Fed Path Looks Through PBOC Easing/Weak Data

  • Fed Funds implied hikes so far sit almost unchanged from late Fri levels despite PBOC easing and weak China data, if anything firming for immediate meetings.
  • There is 64bp priced for Sep 21 on the way to a cumulative 120bp to 3.52% by year-end and 133bp to a peak of 3.66% at Mar’23. Inversion was trimmed to circa 45bp of cuts to end’23.
  • Despite last week’s CPI miss, the payrolls beat still sets the tone when it comes to the terminal, with Fedspeak of potential higher for longer helping lift 2H23 rate expectations further – see chart.
  • No Fedspeak scheduled today.

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