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Williams: Don't Know If Need To Raise Rates Above Neutral

STIR FUTURES
  • Fedspeak coming thick and fast with follow-up comments from Williams (voter) adding to Barkin (’24 voter) just now.
  • Of note, Williams agrees with Powell that 50bp hikes should be on the table with balance sheet cuts giving space for 50bp hike at “next meetings”.
  • But in a more dovish tilt, he adds that he doesn’t know if the FOMC has to raise rates above neutral and that inflation expectations are consistent with the 2% inflation target today.
  • The latter helps limit the rise in hike expectations, with Fed Funds pricing for the Sep meeting (where the implied rate moves above the 2% lower end of the neutral rate range) 3bps off an earlier low with 135bp of cumulative hikes.
  • Nearer-term meetings sit higher at 53bps for June and 99bps for July.

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