Hike By End Of July FOMC Fully Priced Once Again

FOMC-dated OIS ticks higher on the back of the firmer than expected run of PCE data, which saw 0.1ppt beats across all of the headline and core metrics, meaning that core PCE revealed an unexpected (modest) pickup in both M/M & Y/Y terms (when compared to BBG consensus). BBG’s calculation of core non-housing services PCE also accelerated M/M. Firmer than expected headline durable goods (although ex transportation was a shade softer than exp.) and personal spending data will also be helping the direction of travel, while personal income matched expectations in M/M terms.

• The OIS strip now prices 13.5bp of tightening for the Bank’s June meeting and has reverted to fully pricing in a 25bp hike come the end of the July gathering (pricing there is 3-4bp firmer vs. pre-release levels.
• Beyond July, 35bp of cuts are now priced by year-end vs. ~38.5bp pre-data.