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STIR: 50bp Of Fed Cuts To Year-End

STIR
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  • Fed Funds implied rates have cooled a little off yesterday’s highs, but the path remains at the high end of the range over the past two months and is in-line with the median 2024 dot.
  • Cumulative cuts from 4.83% effective: 23bp Nov, 50bp Dec, 71bp Jan and 121bp June.
  • A recap of overnight Fedspeak from some prominent members either side of median:
    • Gov. Kugler (voter) unsurprisingly maintained a dovish tone, having already revealed she “strongly supported” the 50bp cut last month. She noted the healthy level of jobs creation is very welcome (following Friday’s payrolls) but sees several metrics pointing toward market cooling. She’ll back more cuts if inflation progress continues and whilst she isn’t sure where the neutral rate is, policy is currently way above it.
    • NY Fed’s Williams (voter) told the FT in an interview that the 50bp cut in September was not a “rule of how we act” in the future, echoing Powell. The jobs report shows the economy is in good health with the current stance of policy well positioned. The goal is to move interest rates to a neutral setting with forward looking indicators closer to target.
    • St Louis Fed’s Musalem (’25) viewed further gradual rate reductions as appropriate over time whilst penciling in a rate path “slightly above” the median dot. The jobs report showed the labor market is strong, with both the labor market and inflation in a “good place”.
  • Bostic (’24) seems likely to headline today’s STIR-related Fedspeak in a moderated conversation on the economic outlook at 1245ET (no text). They’ll be the first relevant comments since payrolls for the hawkish-leaning FOMC member.
  • Note that VP Jefferson (voter) is set to give his first public remarks since May but will dwell on financial stability, talking on the discount window at 1930ET. 
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  • Fed Funds implied rates have cooled a little off yesterday’s highs, but the path remains at the high end of the range over the past two months and is in-line with the median 2024 dot.
  • Cumulative cuts from 4.83% effective: 23bp Nov, 50bp Dec, 71bp Jan and 121bp June.
  • A recap of overnight Fedspeak from some prominent members either side of median:
    • Gov. Kugler (voter) unsurprisingly maintained a dovish tone, having already revealed she “strongly supported” the 50bp cut last month. She noted the healthy level of jobs creation is very welcome (following Friday’s payrolls) but sees several metrics pointing toward market cooling. She’ll back more cuts if inflation progress continues and whilst she isn’t sure where the neutral rate is, policy is currently way above it.
    • NY Fed’s Williams (voter) told the FT in an interview that the 50bp cut in September was not a “rule of how we act” in the future, echoing Powell. The jobs report shows the economy is in good health with the current stance of policy well positioned. The goal is to move interest rates to a neutral setting with forward looking indicators closer to target.
    • St Louis Fed’s Musalem (’25) viewed further gradual rate reductions as appropriate over time whilst penciling in a rate path “slightly above” the median dot. The jobs report showed the labor market is strong, with both the labor market and inflation in a “good place”.
  • Bostic (’24) seems likely to headline today’s STIR-related Fedspeak in a moderated conversation on the economic outlook at 1245ET (no text). They’ll be the first relevant comments since payrolls for the hawkish-leaning FOMC member.
  • Note that VP Jefferson (voter) is set to give his first public remarks since May but will dwell on financial stability, talking on the discount window at 1930ET.