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Mester Clarifies Openness To Larger Than 50bp Hikes

FED
  • Mester (’22 voter) largely keeps to comments from Tuesday in prepared remarks at an ECB event, but gives more specifics on timing of changes in the pace of tightening.
  • She expects “it to be appropriate to raise the policy rate another 50 basis points at each of our next two meetings” (seemingly consensus on the FOMC) and then “If by the September FOMC meeting, the monthly readings on inflation provide compelling evidence that inflation is moving down, then the pace of rate increases could slow, but if inflation has failed to moderate, then a faster pace of rate increases may be necessary”.
  • 2Y Tsy yields have increased 1.5bps since her comments (+5bps on the day) whilst Fed Funds pricing of hikes gets a small nudge but sits largely where it’s been through most of the US session with a cumulative 102bps for July and 140bps for Sep.
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  • Mester (’22 voter) largely keeps to comments from Tuesday in prepared remarks at an ECB event, but gives more specifics on timing of changes in the pace of tightening.
  • She expects “it to be appropriate to raise the policy rate another 50 basis points at each of our next two meetings” (seemingly consensus on the FOMC) and then “If by the September FOMC meeting, the monthly readings on inflation provide compelling evidence that inflation is moving down, then the pace of rate increases could slow, but if inflation has failed to moderate, then a faster pace of rate increases may be necessary”.
  • 2Y Tsy yields have increased 1.5bps since her comments (+5bps on the day) whilst Fed Funds pricing of hikes gets a small nudge but sits largely where it’s been through most of the US session with a cumulative 102bps for July and 140bps for Sep.