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Fed Rate Path Eases Back With Powell Eyed

  • Fed Funds implied hikes have trimmed some of yesterday’s continued climb although a largely parallel shift from the terminal onwards keeps 2H23 cuts near recent lows of 33bps (50bps pre-payrolls).
  • 25.5bp for Mar (unch), cumulative 43.5bp for May (-1.5bp), 53bp to terminal 5.11% in Jun/Jul (-3/-4.5bp) before 4.78% Dec (-5bp).
  • Chair Powell remarks expected to start 1240ET. Follows limited Fedspeak post-FOMC and payrolls. So far Bostic (’24) late yesterday still saw two more hikes as base case but the jobs data raised the possibility of a higher terminal, and Daly (’24) Fri saw the Dec dots as a good indicator of where headed but is prepared to do more if needed.

FOMC_dated Fed Funds futures implied ratesSource: Bloomberg

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