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Fed Rates Shrug Off Israel-Iran Strikes

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  • Fed Funds implied rates have recovered through the day and are currently at levels that almost fully reverse the overnight slump on Israel’s counterstrike in Iran.
  • Cumulative cuts: 1bp May, 5bp Jun, 12.5bp Jul, 23bp Sep, 29bp Nov and 40bp Dec.
  • This week has currently seen a further 7bp of cuts priced out for 2024, with an implied Dec’24 rate now 28bps higher than pre-CPI levels. At 4.93% it remains off the latest high of 4.96% seen after Chair Powell's "lack of progress" remarks on Tuesday.
  • Leading a very light docket, Chicago Fed’s Goolsbee (’25 voter) said in prepared remarks that it makes sense to wait and get more clarify before moving rates, as the stalling in inflation progress so far in 2024 can’t be dismissed. The hawkish comments by Goolsbee's standards, had limited impact after hawkish commentary from a range of other FOMC members already this week including Powell, Vice Chair Jefferson and NY Fed's Williams.
  • Richmond Fed's Barkin (’24) added in a Bloomberg interview that demand is robust but there are no signs the economy is overheating.

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  • Fed Funds implied rates have recovered through the day and are currently at levels that almost fully reverse the overnight slump on Israel’s counterstrike in Iran.
  • Cumulative cuts: 1bp May, 5bp Jun, 12.5bp Jul, 23bp Sep, 29bp Nov and 40bp Dec.
  • This week has currently seen a further 7bp of cuts priced out for 2024, with an implied Dec’24 rate now 28bps higher than pre-CPI levels. At 4.93% it remains off the latest high of 4.96% seen after Chair Powell's "lack of progress" remarks on Tuesday.
  • Leading a very light docket, Chicago Fed’s Goolsbee (’25 voter) said in prepared remarks that it makes sense to wait and get more clarify before moving rates, as the stalling in inflation progress so far in 2024 can’t be dismissed. The hawkish comments by Goolsbee's standards, had limited impact after hawkish commentary from a range of other FOMC members already this week including Powell, Vice Chair Jefferson and NY Fed's Williams.
  • Richmond Fed's Barkin (’24) added in a Bloomberg interview that demand is robust but there are no signs the economy is overheating.