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Fed Rate Path Holding Lower Post-FOMC

  • Fed Funds implied rates have seen a recent dip lower again as First Horizon slides pre-market, after overnight steadily retracing a fall that started after Chair Powell’s presser concluded yesterday. Rates remain below pre-FOMC levels.
  • Yesterday’s 25bp hike to 5-5.25% is still seen as the peak for the cycle with currently just 2.5bp of cuts priced for June and half of it unwound in July.
  • Assuming a current effective 5.08%, the first full cut is seen for Sep (-32bps to 4.76%) with three cumulative cuts to year end (-80bps to 4.28%).
  • Bullard (non-voter) and Gov Cook (voter) are first on the slate for tomorrow when the blackout is lifted.

FOMC-dated Fed Funds implied ratesSource: Bloomberg

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