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STIR: Fed Rates Moving Closer To Post Dovish Powell Levels

STIR
BulletMarketsFixed Income Bullets
  • Fed Funds implied rates have extended yesterday’s decline overnight, with WTI (-0.6%) broadly stabilizing relative to heavy losses yesterday but industrial metals falling further (copper -2.5%, iron ore -2.1%).
  • It sees the Dec’24 rate some 2bps lower which leaves 105bp of cuts over the next three meetings, close to the 106bp seen in subsequent reaction to Powell’s dovish Jackson Hole speech.
  • Cumulative cuts from 5.33% effective: 35.3bp Sep, 70bp Nov, 105bp Dec, 134bp Jan and 197bp June. 

 

  • The next scheduled Fedspeak is still only Williams and Waller in post-payrolls appearances on Friday, although today’s Beige Book offers some commentary in the interim.
  • Recent Beige Books have increasingly noted price sensitivity by consumers but expect greatest focus on labor market comments this time. The Jul 17 report gave an impression of further rebalancing rather than anything more abrupt: “Most Districts reported employment was flat or up slightly, while a few Districts reported modest employment growth. Several Districts reported declines in employment in the manufacturing sector due to slowdowns in new orders. Skilled-worker availability remained a challenge across all Districts; however, several Districts reported some improvement in labor supply conditions. Additionally, labor turnover was lower, which reduced demand to find new workers. Looking ahead, contacts in several Districts expect to be more selective on who they hire and not backfill all open positions.”
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  • Fed Funds implied rates have extended yesterday’s decline overnight, with WTI (-0.6%) broadly stabilizing relative to heavy losses yesterday but industrial metals falling further (copper -2.5%, iron ore -2.1%).
  • It sees the Dec’24 rate some 2bps lower which leaves 105bp of cuts over the next three meetings, close to the 106bp seen in subsequent reaction to Powell’s dovish Jackson Hole speech.
  • Cumulative cuts from 5.33% effective: 35.3bp Sep, 70bp Nov, 105bp Dec, 134bp Jan and 197bp June. 

 

  • The next scheduled Fedspeak is still only Williams and Waller in post-payrolls appearances on Friday, although today’s Beige Book offers some commentary in the interim.
  • Recent Beige Books have increasingly noted price sensitivity by consumers but expect greatest focus on labor market comments this time. The Jul 17 report gave an impression of further rebalancing rather than anything more abrupt: “Most Districts reported employment was flat or up slightly, while a few Districts reported modest employment growth. Several Districts reported declines in employment in the manufacturing sector due to slowdowns in new orders. Skilled-worker availability remained a challenge across all Districts; however, several Districts reported some improvement in labor supply conditions. Additionally, labor turnover was lower, which reduced demand to find new workers. Looking ahead, contacts in several Districts expect to be more selective on who they hire and not backfill all open positions.”