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Fed Rate Path Holding Near Pre-ISM Services Beat

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  • Fed Funds implied rates are unchanged overnight for near-term meetings and slightly higher further out, but don’t change the yesterday’s takeaway of pushing back close to pre-ISM Services levels.
  • Cumulative hikes from 5.33% effective: +1.5bp Sep and +11.5bp Nov to a terminal 5.45%, still closely followed by +11bp for Dec.
  • Cuts from Nov terminal: 39bp to Jun’24 (from 40bp yesterday) and 109bp to Dec’24 (from 108bp). It’s been a volatile week for 2024 rate cut expectations, closing on Monday at 124bp before recent lows of 101bp after ISM.
  • Logan (’23 voter) after the close yesterday: “My base case is that there is work left to do […] I’m not yet convinced that we’ve extinguished excess inflation. But in today’s complex economic environment, returning inflation to 2% will require a carefully calibrated approach — not endless buckets of cold water”.

Source: Bloomberg

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  • Fed Funds implied rates are unchanged overnight for near-term meetings and slightly higher further out, but don’t change the yesterday’s takeaway of pushing back close to pre-ISM Services levels.
  • Cumulative hikes from 5.33% effective: +1.5bp Sep and +11.5bp Nov to a terminal 5.45%, still closely followed by +11bp for Dec.
  • Cuts from Nov terminal: 39bp to Jun’24 (from 40bp yesterday) and 109bp to Dec’24 (from 108bp). It’s been a volatile week for 2024 rate cut expectations, closing on Monday at 124bp before recent lows of 101bp after ISM.
  • Logan (’23 voter) after the close yesterday: “My base case is that there is work left to do […] I’m not yet convinced that we’ve extinguished excess inflation. But in today’s complex economic environment, returning inflation to 2% will require a carefully calibrated approach — not endless buckets of cold water”.

Source: Bloomberg