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STIR: Fed Funds Pricing A Little More Hawkish On The Day

STIR
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Fed funds implied pricing was little changed Thursday, with data proving mixed (downside surprise in the Philly Fed manufacturing survey, offset by larger than expected jump in continuing jobless claims, offset by lower than expected initial claims and soaring Philly Fed expectations). Meanwhile Fed speakers (Schmid, Goolsbee, Hammack, Williams) did not bring anything new to the rate discussion.

  • A 25bp cut in December remains a little better than 55% likely vs 45% of a hold, with the first full cut only priced by March 2025; there is roughly 3bp less in cumulative cuts seen through end-2025.
  • Deutsche Bank now sees the Fed funds rate held at 4.25-4.50% through 2025 (following a December 25bp cut), largely on account of the inflationary implications of tariffs. That's one of the few analyst views that includes fewer cuts than market pricing (indeed 50bp fewer cuts than FF implied through Dec-25). 

 

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Fed funds implied pricing was little changed Thursday, with data proving mixed (downside surprise in the Philly Fed manufacturing survey, offset by larger than expected jump in continuing jobless claims, offset by lower than expected initial claims and soaring Philly Fed expectations). Meanwhile Fed speakers (Schmid, Goolsbee, Hammack, Williams) did not bring anything new to the rate discussion.

  • A 25bp cut in December remains a little better than 55% likely vs 45% of a hold, with the first full cut only priced by March 2025; there is roughly 3bp less in cumulative cuts seen through end-2025.
  • Deutsche Bank now sees the Fed funds rate held at 4.25-4.50% through 2025 (following a December 25bp cut), largely on account of the inflationary implications of tariffs. That's one of the few analyst views that includes fewer cuts than market pricing (indeed 50bp fewer cuts than FF implied through Dec-25). 

 

Keep reading...Show less