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STIR: Fed Rates Push Higher Ahead Of Powell On Confluence Of Factors

STIR
  • Fed Funds implied rates have seen a sizeable push higher today to more than reverse yesterday’s decline that had been helped but not entirely driven by preliminary payrolls benchmark revisions and the FOMC minutes showing a “vast majority” back in July were ready to cut at the September meeting. 
  • Cumulative cuts from 5.33% effective: 31.5bp Sep, 64bp Nov, 97bp Dec, 124bp Jan and 184bp Jun. 
  • The 97bp of cuts to year-end compares with 101bp as US desks filtered in this morning and a fleeting 106bp after the minutes yesterday. 
  • Today’s increases have come from a combination of factors rather than any single driver amidst summer markets. 
  • They include stronger Eurozone PMIs, a hawkish Kansas City Fed’s Schmid (’25 voter) saying he needs to see more data before supporting a rate cut plus other Fedspeak generally not showing any concern about yesterday’s payrolls revisions, weekly jobless claims coming in as expected rather than showing any signs of additional labor market cooling and a beat for the US Services PMI (albeit limited considering soft employment and output price details), along with US-Canadian supply chain pressures following Canadian rail strikes and WTI recovering yesterday’s losses. 
  • That all comes before Powell’s Jackson Hole speech tomorrow at 1000ET. See the MNI Preview here.  

 

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