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STIR: Next Fed Cut Seen In September Ahead Of US CPI

STIR
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  • Fed Funds implied rates have pulled back a little further from post-NFP driven highs, aided overnight by some spillover from softer than expected UK CPI. US CPI is firmly in focus today (MNI Preview here).
  • CPI is however followed by Fedspeak (including Williams expected to reiterate a desire for rates to move lower towards neutral) before an increasingly important Beige Book as some FOMC members question data quality (e.g. Gov. Bowman last week).
  • Cumulative cuts from 4.33% effective: 0.5bp Jan, 5bp Mar, 10bp May, 18bp Jun, 21bp Jul, 26bp Sep and 31.5bp Dec.
  • All four of today’s scheduled Fed speakers come after CPI but we place most focus on NY Fed’s Williams in a keynote address at 1100ET and before that Minneapolis Fed’s Kashkari in a Q&A.
    • 0920ET – Barkin (non-voter). He again repeats a speech from Jan 3 but Q&A could be more notable for any post CPI views.
    • 1000ET – Kashkari (’26) in Q&A. There’s a chance he was one of the four dots who preferred no rate cut last month. He last spoke Nov 25, saying a December cut was a reasonable consideration whilst the neutral rate may be higher, with policy not as restrictive. Tit-for-tat tariffs could be inflationary.
    • 1100ET – Williams (voter) keynote remarks (text + Q&A). One of the most senior FOMC members, he last spoke on Dec 20 to CNBC, seeing time to assess the data with policy in a great place. He is one of the FOMC members who has started to incorporate some assumptions about a second Trump term but notes a lot of uncertainty for 2025. He sees rates as being “pretty restrictive” and doesn’t think we’re at a long-run neutral rate now, with a real run neutral estimate currently at 0.75% (lifted “a bit” by post-pandemic productivity). We expect a repeat that his baseline is for the Fed to continue moving towards neutral.
    • 1200ET – Goolsbee (’25). The most dovish member of the FOMC, he said after last week’s payrolls that he still expects rates to decline and that it’s wrong to say that the Fed isn’t making progress on inflation. He doesn’t see evidence of any overheating US economy and policy is still restrictive on rate-sensitive sectors.  
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  • Fed Funds implied rates have pulled back a little further from post-NFP driven highs, aided overnight by some spillover from softer than expected UK CPI. US CPI is firmly in focus today (MNI Preview here).
  • CPI is however followed by Fedspeak (including Williams expected to reiterate a desire for rates to move lower towards neutral) before an increasingly important Beige Book as some FOMC members question data quality (e.g. Gov. Bowman last week).
  • Cumulative cuts from 4.33% effective: 0.5bp Jan, 5bp Mar, 10bp May, 18bp Jun, 21bp Jul, 26bp Sep and 31.5bp Dec.
  • All four of today’s scheduled Fed speakers come after CPI but we place most focus on NY Fed’s Williams in a keynote address at 1100ET and before that Minneapolis Fed’s Kashkari in a Q&A.
    • 0920ET – Barkin (non-voter). He again repeats a speech from Jan 3 but Q&A could be more notable for any post CPI views.
    • 1000ET – Kashkari (’26) in Q&A. There’s a chance he was one of the four dots who preferred no rate cut last month. He last spoke Nov 25, saying a December cut was a reasonable consideration whilst the neutral rate may be higher, with policy not as restrictive. Tit-for-tat tariffs could be inflationary.
    • 1100ET – Williams (voter) keynote remarks (text + Q&A). One of the most senior FOMC members, he last spoke on Dec 20 to CNBC, seeing time to assess the data with policy in a great place. He is one of the FOMC members who has started to incorporate some assumptions about a second Trump term but notes a lot of uncertainty for 2025. He sees rates as being “pretty restrictive” and doesn’t think we’re at a long-run neutral rate now, with a real run neutral estimate currently at 0.75% (lifted “a bit” by post-pandemic productivity). We expect a repeat that his baseline is for the Fed to continue moving towards neutral.
    • 1200ET – Goolsbee (’25). The most dovish member of the FOMC, he said after last week’s payrolls that he still expects rates to decline and that it’s wrong to say that the Fed isn’t making progress on inflation. He doesn’t see evidence of any overheating US economy and policy is still restrictive on rate-sensitive sectors.  
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