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Fed Path Maintaining Data Shift Lower, Notably So For 2H23

STIR FUTURES
  • Fed Fund implied hikes holding off earlier lows after a string of mostly softer than expected US data but still lower on the day.
  • 27bp for Feb 1 (unch), cumulative 46bp for Mar (-1bp), 55bp to terminal 4.88% in Jun (-3.5bp, very close to 4.875% in May) before 51bps of cuts to 4.37% in Dec (-7bp).
  • The terminal has been cut by 4bps in the past two days but the largest moves have been further out, with cuts to year-end swinging from 39bps to 51bps.
  • Ahead, still have the Beige Book plus ’23 voters Harker 1400ET and Logan 1700ET, both including text.
  • Bullard (non-voter) earlier repeated a desire to get to a 5 handle (appropriately restrictive) as soon as possible whilst Mester (non-voter) sees things moving in the right direction but with further hikes needed to a little bit above the 5-5.25% FOMC median dot.

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