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Fed Path Pulls Off Post CPI Lows But Terminal Still 15bp Lower On Day

STIR FUTURES
  • Fed Funds implied hikes see a small increase from post CPI lows, possibly helped by Daly most recently on stepping down but not pausing.
  • Showing 50bp for Dec (-6bp), cumulative 85bp to 4.70% for Feb’23 (-9bp), terminal 4.88% May’23 (-15.5bp) after being pulled forward from June and 4.40% for Dec’23 (-30bp).
  • Both terminal and end-23 rates remain above recent lows seen after the ECB decision prior to the Nov 2 FOMC (4.75% for terminal and 4.30% for Dec’23).

  • Daly (’24): Time is now to step down on rate hike pace but pausing is not a subject of discussion. Jobs growth stronger than we need it to be and US inflation data ‘good news’ but ‘far from a victory’. Need to see positive traction on getting to 2% inflation, not prepared to make mistake of higher inflation expectations.

FOMC-dated Fed Funds implied ratesSource: Bloomberg

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  • Fed Funds implied hikes see a small increase from post CPI lows, possibly helped by Daly most recently on stepping down but not pausing.
  • Showing 50bp for Dec (-6bp), cumulative 85bp to 4.70% for Feb’23 (-9bp), terminal 4.88% May’23 (-15.5bp) after being pulled forward from June and 4.40% for Dec’23 (-30bp).
  • Both terminal and end-23 rates remain above recent lows seen after the ECB decision prior to the Nov 2 FOMC (4.75% for terminal and 4.30% for Dec’23).

  • Daly (’24): Time is now to step down on rate hike pace but pausing is not a subject of discussion. Jobs growth stronger than we need it to be and US inflation data ‘good news’ but ‘far from a victory’. Need to see positive traction on getting to 2% inflation, not prepared to make mistake of higher inflation expectations.

FOMC-dated Fed Funds implied ratesSource: Bloomberg