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STIR: Fed Rate Path Maintains Waller’s Dovish Shift

STIR
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  • Fed Funds implied rates hold most of late yesterday’s Waller-inspired dovish shift – we repeat part of what we wrote yesterday for an important tee-up ahead of today’s JOLTS data.
  • Whilst he currently supports a cut in December, the market only sees it as 50/50 decision between cutting or pausing despite the dovish shift.
  • Cumulative cuts from 4.58% effective: 18bp Dec, 23bp Jan, 37bp Mar and 56bp June.
  • Today sees Daly ('24) at 1215ET, Kugler (voter) at 1235ET and Goolsbee ('25) at 1330ET. We watch Kugler in particular, a usually more dovish FOMC member who two weeks ago surprised with more hawkish remarks including discussing the possibility of a December pause.
  • Waller from yesterday: While he sounded open-minded to the arguments for a hold in December, his commentary is about as explicit an indication as we've received that the base case for the FOMC is to cut again, unless incoming data surprises to the strong side: "Based on the economic data in hand today and forecasts that show that inflation will continue on its downward path to 2 percent over the medium term, at present I lean toward supporting a cut to the policy rate at our December meeting. But that decision will depend on whether data that we will receive before then surprises to the upside and alters my forecast for the path of inflation."
  • That may include this Friday's nonfarm payrolls data, but Waller basically discounts it, saying "I do expect a rebound in payroll data in the November employment report that is due out later this week, but it may take more time for the full swings in the payroll data to fully wash out. For that reason, I am leaning on other metrics to reveal what is really going on in the labor market." Indeed he says NFPs "may have misleading [] data", and specifically says that in deciding his approach for the December meeting, he will be looking "very closely" at additional data including Tuesday's JOLTS, next   week's CPI / PPI, and retail sales in 2 weeks time.”
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  • Fed Funds implied rates hold most of late yesterday’s Waller-inspired dovish shift – we repeat part of what we wrote yesterday for an important tee-up ahead of today’s JOLTS data.
  • Whilst he currently supports a cut in December, the market only sees it as 50/50 decision between cutting or pausing despite the dovish shift.
  • Cumulative cuts from 4.58% effective: 18bp Dec, 23bp Jan, 37bp Mar and 56bp June.
  • Today sees Daly ('24) at 1215ET, Kugler (voter) at 1235ET and Goolsbee ('25) at 1330ET. We watch Kugler in particular, a usually more dovish FOMC member who two weeks ago surprised with more hawkish remarks including discussing the possibility of a December pause.
  • Waller from yesterday: While he sounded open-minded to the arguments for a hold in December, his commentary is about as explicit an indication as we've received that the base case for the FOMC is to cut again, unless incoming data surprises to the strong side: "Based on the economic data in hand today and forecasts that show that inflation will continue on its downward path to 2 percent over the medium term, at present I lean toward supporting a cut to the policy rate at our December meeting. But that decision will depend on whether data that we will receive before then surprises to the upside and alters my forecast for the path of inflation."
  • That may include this Friday's nonfarm payrolls data, but Waller basically discounts it, saying "I do expect a rebound in payroll data in the November employment report that is due out later this week, but it may take more time for the full swings in the payroll data to fully wash out. For that reason, I am leaning on other metrics to reveal what is really going on in the labor market." Indeed he says NFPs "may have misleading [] data", and specifically says that in deciding his approach for the December meeting, he will be looking "very closely" at additional data including Tuesday's JOLTS, next   week's CPI / PPI, and retail sales in 2 weeks time.”