Fed Rates Slip But Powell Keeps Very Near-Term Unchanged

• Fed Funds implied rates are little changed on the Beige Book release having already pushed lower through the day.
• Cumulative cuts from 5.33% effective: 1bp May, 5bp Jun, 13bp Jul, 26bp Sep, 45bp Dec.
• May and June pricing is unchanged from pre-Powell levels yesterday, benefiting from him saying recent data have shown a lack of further progress on inflation and that it will likely take longer to get confidence for cuts.
• Further out, the Dec’24 implied rate has now dipped 3.5bps since prior to his appearance.

Despite the limited reaction in near-term rates, the Beige Book still contains some

interesting dovish elements in the prices section:

• a considerable weakening in recent months in ability to pass cost increases on to consumers
• contracts expected that inflation would hold steady at a slow pace moving forward
• there are upside risks to near-term input and output prices but mostly confined to manufacturers.

It comes against a firmer growth backdrop, with a wider share of Districts reporting "slight or modest" economic growth (10 vs 8 in March). The remaining two saw no changes vs 3 seeing no change and 1 seeing a slight softening in Mar.