STIR: Fed Rates Eyeing Close With Fewest 2025 Cuts Since NFPs
Aug-15 17:26
- Fed Funds implied rates have steadily pushed higher over the past two hours as US fixed income more broadly appears to slowly catch up with sizeable European underperformance earlier in the session (with its lack of fresh catalysts).
- The day’s moves, with the Dec 2025 rate now 2bp higher, modestly extend yesterday’s hawkish reaction to very strong PPI inflation and leaves the near-term path above pre-CPI levels except for September.
- Cumulative cuts from 4.33% effective: 22.5bp Sep, 36.5bp Oct, 55.5bp Dec, 66bp Jan and 78.5bp Mar.
- The SOFR implied terminal yield of 3.105% (SFRH7) is 2.5bp higher on the day as it just nudges back below fully pricing five cuts from current levels having flittered either side of this since the hugely weak revisions to the July NFP report on Aug 1.
- The Trump-Putin meeting in Alaska at 1500ET is still to come today.
- In firm focus next week, Fed Chair Powell’s Jackson Hole address on Friday at 1000ET. It’s in the unenviable position of coming ahead of August NFP and CPI/PPI reports before the Sept 17 FOMC decision.
- Chicago Fed’s Goolsbee (’25 voter), historically one of the most dovish FOMC members, reiterated today that he needs to see at least another inflation report to be sure persistent price pressures aren’t picking up.
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