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STIR: Fed Rates Little Swayed By Potential Tariff Delay

STIR
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  • There’s been minimal reaction in Fed rates to the earlier Reuters story on Trump being expected to delay the start of tariffs to Mar 1.
  • There was more sensitivity yesterday afternoon when implied rates steadily climbed after Trump said he would push ahead with 25% tariffs on Canada Feb 1. Trump is however still due to sign executive orders at 1500ET today.
  • The hawkish Fed hold on Wednesday maintains some near-term stickiness for implied rates over the next few meetings, with just 4.5bp of cuts priced for Mar vs 8bp pre-FOMC.
  • A next 25bp cut is almost fully priced for June (24bp) whilst implied rates for meetings beyond that are increasingly lower on the week as the Monday’s US tech-led sell-off continues to weigh – see charts.
  • The 47.5bp of cuts for 2025 is close to the median dot from Dec and little changed from pre-FOMC levels.
  • Cumulative cuts from 4.33% effective: 4.5bp Mar, 12.5bp May, 24bp Jun, 30bp Jul and 47.5bp Dec.
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  • There’s been minimal reaction in Fed rates to the earlier Reuters story on Trump being expected to delay the start of tariffs to Mar 1.
  • There was more sensitivity yesterday afternoon when implied rates steadily climbed after Trump said he would push ahead with 25% tariffs on Canada Feb 1. Trump is however still due to sign executive orders at 1500ET today.
  • The hawkish Fed hold on Wednesday maintains some near-term stickiness for implied rates over the next few meetings, with just 4.5bp of cuts priced for Mar vs 8bp pre-FOMC.
  • A next 25bp cut is almost fully priced for June (24bp) whilst implied rates for meetings beyond that are increasingly lower on the week as the Monday’s US tech-led sell-off continues to weigh – see charts.
  • The 47.5bp of cuts for 2025 is close to the median dot from Dec and little changed from pre-FOMC levels.
  • Cumulative cuts from 4.33% effective: 4.5bp Mar, 12.5bp May, 24bp Jun, 30bp Jul and 47.5bp Dec.
image