Fed Pricing Slightly More Dovish On PCE

In-line-with exp. headline and core PCE data helps global core FI markets to base after earlier weakness.

• •Modest negative revisions to the prior M/M readings also support, along with slightly higher-than-expected weekly jobless claims readings.
• •Rallies are capped by the firmer-than-expected personal income reading.
• •End of ’24 FOMC-dated OIS pricing now shows ~79 bp of cuts vs. ~77bp pre-data.
• •Markets don’t want to trade through the median dot from the Fed’s Dec ’23 SEP (which showed 75bp of cuts in ’24).
• •19bp of cuts are priced through the June ’24 FOMC vs. 17.5bp pre-data.
• •The first 25bp cut is more than fully discounted through the end of the July ’24 FOMC.