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Fed Rate Path Little Changed After Two-Way External Drivers

STIR
  • Fed Funds implied rates are little changed from yesterday's close after any impulse from the RBA’s surprise 25bp hike was offset by ECB consumer inflation expectations declining “significantly”.
  • It leaves the June skip narrative intact, whilst earlier UBS added a 25bp hike to July after originally seeing their final hike in May.
  • Cumulative changes from 5.08% effective: +6.5bp Jun (+0.5bp on the day), +19bp Jul (+0.5bp), +15.5bp Sep (unch), +4bp Nov (-0.5bp), -12.5bp Dec (-1bp) and -32bp Jan (-1bp).
  • Yesterday’s ISM services miss with weak prices paid still weighs but rates remain above pre-payrolls levels – see table for comparison.

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