October 17, 2024 19:45 GMT
STIR: Nov Cut Still Strongly Implied, But Early 2025 Cut Conviction Fades
STIR
Thursday's US macro data - highlighted by well-above expected retail sales growth, but also the reassurance of in-line jobless claims after the previous week's jump - pushed the path of Fed rates a little higher through 2025.
- Futures still imply a strong chance of a 25bp cut in November (90%), but that probability has dipped from closer to 96% yesterday. Through end-year, futures now see 42bp of cuts, vs 46bp Wednesday - suggesting that the 2x Fed cut narrative is being challenged by robust economic data. Futures have erased a full 25bp rate cut by end-2024 compared with pre-Oct 3 nonfarm payrolls (Dec 18 2024 FOMC meeting-implied was 4.16% implied, now 4.41%).
- The biggest moves are in early 2025 meeting date-implied rates, where there's 4-5bp fewer cuts now being priced, suggestive of the Fed starting to reconsider its options in the New Year.
- The implied 3.35% end-2025 rate is in line with the FOMC's Dot Plot median projection, but at 3.35% is a little less dovish (3.6bp) vs yesterday's pricing. As we noted earlier, it would probably take further significant data surprises for the FOMC to reconsider its general stance that it is eyeing a return to a perceived neutral stance.
| Meeting | Current FF Implieds (%) | Prior Sess. (Oct 16) | 1d Chg (bp) | Cumulative Change From Current Rate (bp) | Incremental Chg (bp) |
| Nov 07 2024 | 4.61 | 4.59 | 1.3 | -22.5 | -22.5 |
| Dec 18 2024 | 4.41 | 4.37 | 4.1 | -42.4 | -19.9 |
| Jan 29 2025 | 4.22 | 4.18 | 4.7 | -60.8 | -18.4 |
| Mar 19 2025 | 3.99 | 3.94 | 4.8 | -83.9 | -23.1 |
| May 07 2025 | 3.82 | 3.77 | 4.7 | -101.2 | -17.3 |
| Jun 18 2025 | 3.65 | 3.61 | 3.8 | -117.8 | -16.6 |
| Jul 30 2025 | 3.56 | 3.52 | 4.0 | -127.5 | -9.7 |
| Sep 17 2025 | 3.46 | 3.42 | 3.9 | -136.7 | -9.2 |
| Oct 29 2025 | 3.41 | 3.37 | 3.5 | -142.5 | -5.8 |
| Dec 10 2025 | 3.35 | 3.32 | 3.6 | -147.8 | -5.3 |
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