Williams Limits Hawkish Reaction To U.S. Retail Sales

The retail sales data initially allows the early hawkish Fed repricing to extend, threatening a clean break of last week’s extremes, before moderating.

• Elsewhere, NY Fed President Williams notes that he doesn’t see recent inflation data as a turning point for Fed policy, with markets taking slower progress on inflation into account. He also pointed to his own expectations for rates to be cut this year, with a focus on real rates given the moderation in inflation. The latter round of comments may have limited the post-data reaction.
• Full discounting of the first 25bp cut slipped to the November FOMC earlier today, with ~28bp of easing now priced over that horizon (vs. ~30bp pre-data).
• ~40bp of cuts are priced through year end, little changed vs. pre-data levels.