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STIR: Further Off Dovish Extremes, Pre-Payrolls Powell In Focus

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  • Fed Funds implied rates have seen surprisingly large spillover stemming from German regional CPI releases which have pushed back against dovish surprises seen in last week’s French and Spanish prints.
  • Cumulative cuts from 4.83% effective: 36bp Nov, 73bp Dec, 105bp Jan and 171bp June.
  • Latest Fedspeak came from Musalem (’25) in an FT interview printed Friday afternoon. He wants to see the Fed revert to cutting rates “gradually” as the US economy could react “very vigorously” to looser financial conditions. In similar comments to Gov Waller: “I’m attuned to the fact that the economy could weaken more than I currently expect [and] the labour market could weaken more than I currently expect […] If that were the case, then a faster pace of rate reductions might be appropriate.”
  • Fed Chair Powell headlines today’s docket, with a luncheon address at the NABE conference in Nashville (text + Q&A). Impact could be limited by the fact there has been relatively little by way of tier one data releases since his FOMC press conference (Friday’s core PCE appeared to be in line with Gov Waller’s estimates).
  • We approach it with the Nov implied rate almost 10bp lower than prior to the Sep 18 FOMC announcement but at levels very similar prior to Powell taking the podium. That should limit impact from similar rhetoric that a 50bp cut earlier this month doesn't set the tone for the cadence of rate cuts ahead.
  • Fed Gov. Bowman (voter) is also set to speak on the economic outlook and policy today at 0850ET (text + Q&A) but we have heard from her in detail since her dissent to the Fed cutting 50bps. 
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  • Fed Funds implied rates have seen surprisingly large spillover stemming from German regional CPI releases which have pushed back against dovish surprises seen in last week’s French and Spanish prints.
  • Cumulative cuts from 4.83% effective: 36bp Nov, 73bp Dec, 105bp Jan and 171bp June.
  • Latest Fedspeak came from Musalem (’25) in an FT interview printed Friday afternoon. He wants to see the Fed revert to cutting rates “gradually” as the US economy could react “very vigorously” to looser financial conditions. In similar comments to Gov Waller: “I’m attuned to the fact that the economy could weaken more than I currently expect [and] the labour market could weaken more than I currently expect […] If that were the case, then a faster pace of rate reductions might be appropriate.”
  • Fed Chair Powell headlines today’s docket, with a luncheon address at the NABE conference in Nashville (text + Q&A). Impact could be limited by the fact there has been relatively little by way of tier one data releases since his FOMC press conference (Friday’s core PCE appeared to be in line with Gov Waller’s estimates).
  • We approach it with the Nov implied rate almost 10bp lower than prior to the Sep 18 FOMC announcement but at levels very similar prior to Powell taking the podium. That should limit impact from similar rhetoric that a 50bp cut earlier this month doesn't set the tone for the cadence of rate cuts ahead.
  • Fed Gov. Bowman (voter) is also set to speak on the economic outlook and policy today at 0850ET (text + Q&A) but we have heard from her in detail since her dissent to the Fed cutting 50bps.