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Fed Rates Holding Bulk of Post-CPI Sell-Off

STIR
  • Fed Funds implied rates have pulled off session highs but hold the bulk of post-CPI gains, in a step away from fully pricing a first cut in June.
  • Cumulative cuts: 0.5bp Mar, 4bp May, 19.5bp Jun, 34bp Jul and 85bp Dec.
  • Core CPI was stronger than expected at a seasonally adjusted 0.36% M/M vs cons 0.3 although the composition offset some of this hawkish surprise.
  • Nevertheless, with six-month run rates for core and supercore CPI increasing three tenths to 3.9% and 5.9% annualized, the report is unlikely to give the FOMC “greater confidence” that inflation is set for a sustainable return to 2% despite a likely still large wedge with PCE measures.

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