STIR: Fed Rates Sticky For Upcoming Meetings, Dovish Shift Beyond
Apr-14 10:49
- Fed Funds implied rates are little changed for meetings out to July but after that increasingly lower on the day with latest announcements of tariff exemptions for electronic items potentially short-lived.
- The Dec’25 implied rate is 6bp lower from Friday’s close.
- Further out the curve, the SOFR terminal implied yield is 8bp lower at 3.32%, pulling back having fully retraced a large drop seen after “Liberation Day” tariffs.
- Cumulative cuts from 4.33% effective: 6.5bp May, 22.5bp Jun, 41bp Jul and 84bp Dec.
- NY Fed consumer inflation expectations will again be of more note than normal after the continued ramping higher in the U.Mich equivalent.
- Focus is also likely on Fed Gov. Waller (permanent voter) speaking on the economic outlook at 1300ET (text and Q&A). It’s his first comments since last week's "pause" and various Treasury / swap market dislocations.
- He talked on balance sheet matters back on Mar 21 to explain his dissent at the Mar 18-19 meeting (balance sheet caution has gone too far, with no evidence reserves nearing an ample level). He had earlier in March said there was nothing wrong with the forecast of two rate cuts this year in a rowing back of particularly dovish comments from January when he noted potential for three or four cuts this year.
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FED: March Economic Projections: Higher Inflation, Weaker Growth, Same Rates
Mar-14 21:28
The MNI Markets Team’s expectations for the updated Economic Projections in the March SEP are below.
- The unemployment rate is likely to rise slightly for 2025 alongside a downgrade in GDP growth, while the 2025 core and headline PCE inflation projections are set to rise again. Changes to later years will likely be limited, however.
- More detail on the shift in Fed funds rate medians is in our meeting preview - we will add more color next week.
FED: Market Pricing Nearly 3 2025 Cuts As Conditions Tighten
Mar-14 21:25
Amid rising government policy uncertainty, sentiment among businesses and consumers has fallen sharply since the start of the year, while equities and the dollar have reversed their post-election rise. Overall, financial conditions have tightened, even if stress is not yet mounting, e.g. no major widening of credit spreads (the accompanying chart shows the Fed’s financial conditions impulse index but only through January).
- Combined with growth fears, this has affected expectations for the Fed’s rate path, with around 18bp more cuts expected in 2025 compared with what was seen after the January FOMC. 65bp of cuts are priced for the year as a whole. 2025 cut pricing reached 71bp before the February inflation data and 76bp before the February payrolls report.
- A rate cut is seen with near zero probability for March’s meeting, but the first full cut is just about priced for June, with a second nearly priced by September.
- Chair Powell has no reason to endorse or refute these expectations – he’s likely to be happy with a press conference that ends with little discernable change in pricing.
CANADA'S CARNEY ANNOUNCES ELIMINATION OF THE CONSUMER CARBON TAX
Mar-14 21:17
- CANADA'S CARNEY ANNOUNCES ELIMINATION OF THE CONSUMER CARBON TAX
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