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STIR: Less Than 30bp Of Cuts Now Priced For Sep FOMC

STIR
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In line to slightly firmer-than-expected CPI data removes some Fed rate cut premium from the market, leaving ~28bp of cuts priced for this month’s FOMC and ~106bp of cuts showing through Dec (vs. ~32bp and ~114bp heading into the data).

  • The combination of last week’s labor market report and today’s CPI data do not seem to warrant a 50bp to start to the Fed’s impending cutting cycle.
  • Ahead of the data we noted that the risk to market positioning lay with a ‘hawkish’ CPI print, given the build up of longs in both SOFR and Tsys, as well as the level of Fed cuts priced into markets (which remains more aggressive than recent Fed guidance and our DC policy team’s work). 
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In line to slightly firmer-than-expected CPI data removes some Fed rate cut premium from the market, leaving ~28bp of cuts priced for this month’s FOMC and ~106bp of cuts showing through Dec (vs. ~32bp and ~114bp heading into the data).

  • The combination of last week’s labor market report and today’s CPI data do not seem to warrant a 50bp to start to the Fed’s impending cutting cycle.
  • Ahead of the data we noted that the risk to market positioning lay with a ‘hawkish’ CPI print, given the build up of longs in both SOFR and Tsys, as well as the level of Fed cuts priced into markets (which remains more aggressive than recent Fed guidance and our DC policy team’s work).