FED: Daly Pushes Back Against 50bp September Cut Calls
San Francisco Fed President Daly pushes back against a 50bp September cut in an interview with the WSJ.
- "San Francisco Fed President Mary Daly pushed back against the need for an interest-rate cut of a half percentage point, or 50 basis points, at the Federal Reserve's September meeting".
- "Fifty sounds, to me, like we see an urgent-I'm worried it would send off an urgency signal that I don't feel about the strength of the labor market," Daly said in an interview Wednesday. "I just don't see that. I don't see the need to catch up."
- "Daly said she had stopped describing the labor market as solid after the July payrolls report, which sharply revised down employment gains for previous months. Other data suggest layoffs remain low, but people who lose jobs spend longer out of work."
Screens fairly similar to Daly's remaks last week: "We will likely need to adjust policy in the coming months. Recalibrating it to match the collective risks to both of our mandated goals." Recall earlier this week she said in a Reuters interview that the Fed may need to cut more than twice by the end of the year. She characterizes policy adjustments as "Recalibrating it to match the collective risks to both of our mandated goals", suggesting she doesn't see aggressive cuts.
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BONDS: Most Of Rally Holds, Curves Flatter
Still no clear driver for the extension of rally in bonds, that was seemingly led by EGBs.
- Major core global FI curves flatten.
- The previously covered FV/US block flattener will have aided the direction of travel, but the fact that the move was EGB-driven negates that as a primary driver.
- Bearish technical themes intact across the major futures contracts.
EU-RUSSIA: Foreign Ministers Look To Sign-Off On 18th Sanctions Package
Foreign ministers from across the EU are meeting in Brussels as they aim to sign off on the 18th package of sanctions against Russia, which is set to include a lower dynamic oil price cap. The process has been held up for some time due to objections from Slovakia. Bratislava's objections have not specifically been about this sanctions package, but regarding the EU's efforts to impose a phase-out of all Russian hydrocarbons.
- The Slovakian gov't argues the phase-out poses threats to its energy security, but it can be approved against Slovakia's wishes, given that it only requires a qualified majority. The sanctions package on the other hand requires unanimity, with the gov't of PM Robert Fico effectively holding the sanctions 'hostage' until a compromise is reached on the phase out.
- Over the weekend, Fico claimed that his gov't would look to have a deal done by today's foreign ministers' meeting, saying “We want to resolve this by Tuesday because tensions are rising on all sides," while hinting at compromise when adding "We need to win something in this fight, though it will not be a 100-0 result...We want political commitments, guarantees from partners and the Commission that this problem will not remain only on Slovakia's back."
- Politico reports that a holdup by Malta at last week's Coreper II meeting has been dealt with and should not prove an obstacle to the package being agreed to today.
- EU High Commissioner for Foreign Affairs and Security Policy Kaja Kallas will deliver a post-meeting presser at ~16:45CET (10:45ET, 15:45BST).
