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Implied Fed 2023 Rates Through CPI Highs

  • Fed Funds implied terminal and end-23 rates have exceeded yesterday’s post-CPI cycle highs. Holding at 79bp for the Nov 2 FOMC and a cumulative 142bp for 4.50% for Dec but the terminal is now seen at 4.95% in Mar’23/May’23 and only falling to 4.62% come Dec’23.
  • The renewed increases comes after the sizeable beat in U.Mich inflation expectations (especially 1Y but also significantly 5-10Y) plus concerted Fedspeak after worrying breadth of inflation with Daly (’24) likely seeing rates go to 4.5-5% and then holding there.
  • Bullard speaks on inflation Sat before a pause for scheduled Fedspeak on Mon with Empire, the first of the business surveys for Oct, headlining the docket.

FOMC-dated Fed Funds implied ratesSource: Bloomberg

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