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STIR: Latest Extension Of Hawkish Fed Repricing On Retail Sales

STIR
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  • Fed Funds implied rates sit as much as 3bp higher for 2025 meetings with the retail sales and Empire data digested.
  • Cumulative cuts from 4.33% effective: 0.5bp for Wed, 6.5bp May, 21bp Jun (vs 22.5bp pre-release), 30bp Jul (vs 31.5bp) and 61bp Dec (vs 64bp).
  • We suspect the control group is doing a lot of the work behind the rates sell-off (+1.0% vs cons 0.3, partly offset by a negative revision to an even weaker January) considering overall sales more clearly disappointed in both the latest increase and revisions.
  • The former appears to be welcomed from a growth angle as it ruled out a weaker print considering some particularly mixed indicators noted ahead of the release.
  • Elsewhere, the Empire State mfg index saw the highest input cost inflation in over two years but also sliding confidence in the admittedly volatile survey. Markets have fluctuated in putting more weight on inflationary positive and growth negative implications from US tariff setting in recent months. 
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  • Fed Funds implied rates sit as much as 3bp higher for 2025 meetings with the retail sales and Empire data digested.
  • Cumulative cuts from 4.33% effective: 0.5bp for Wed, 6.5bp May, 21bp Jun (vs 22.5bp pre-release), 30bp Jul (vs 31.5bp) and 61bp Dec (vs 64bp).
  • We suspect the control group is doing a lot of the work behind the rates sell-off (+1.0% vs cons 0.3, partly offset by a negative revision to an even weaker January) considering overall sales more clearly disappointed in both the latest increase and revisions.
  • The former appears to be welcomed from a growth angle as it ruled out a weaker print considering some particularly mixed indicators noted ahead of the release.
  • Elsewhere, the Empire State mfg index saw the highest input cost inflation in over two years but also sliding confidence in the admittedly volatile survey. Markets have fluctuated in putting more weight on inflationary positive and growth negative implications from US tariff setting in recent months. 
image