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STIR: Geopol Risk Shifts Fed Path Lower

STIR
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  • Fed Funds implied rates are off earlier lows but still sit firmly lower in geopolitical spillover from Russia’s updated nuclear doctrine and Ukraine striking targets in Russian territory with ATACMS for the first time.
  • Implied rates are 1bp lower for Dec, 2.5bp lower for Mar and 4bp lower for June. Near-term implied rates still hold the bulk of last week's increase on hawkish Fedspeak but mid-2025 implied rates are now back at post-CPI levels.
  • Cumulative cuts from 4.58% effective: 16bp Dec, 24bp Jan, 40bp Mar and 62p June.
  • Today sees Schmid (’25 voter, hawk) speak on the economic outlook and monetary policy at 1310ET.
  • His comments last week were limited, noting the depth of eventual Fed cutting remains undetermined. Expect greater focus tomorrow on both the near-term outlook after a typically dovish Governor Kugler talked on pausing prospects last week as well as continued debate over how restrictive policy currently is along with longer-term neutral rate estimates.
  • Before then, expect greater focus than usual on the state-level payrolls and unemployment data at 1000ET after the surprisingly weak October payrolls report and its potential storm disruption.  
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  • Fed Funds implied rates are off earlier lows but still sit firmly lower in geopolitical spillover from Russia’s updated nuclear doctrine and Ukraine striking targets in Russian territory with ATACMS for the first time.
  • Implied rates are 1bp lower for Dec, 2.5bp lower for Mar and 4bp lower for June. Near-term implied rates still hold the bulk of last week's increase on hawkish Fedspeak but mid-2025 implied rates are now back at post-CPI levels.
  • Cumulative cuts from 4.58% effective: 16bp Dec, 24bp Jan, 40bp Mar and 62p June.
  • Today sees Schmid (’25 voter, hawk) speak on the economic outlook and monetary policy at 1310ET.
  • His comments last week were limited, noting the depth of eventual Fed cutting remains undetermined. Expect greater focus tomorrow on both the near-term outlook after a typically dovish Governor Kugler talked on pausing prospects last week as well as continued debate over how restrictive policy currently is along with longer-term neutral rate estimates.
  • Before then, expect greater focus than usual on the state-level payrolls and unemployment data at 1000ET after the surprisingly weak October payrolls report and its potential storm disruption.