NORGES BANK: June MPR Puts Rates Higher for Longer
Jun-23 13:40
- A quicker pace of tightening, sharply higher policy path projections and stronger assumptions for wages drove a hawkish market response to the Norges Bank rate decision, and the bank went further – stressing that their job on inflation is not yet complete, with additional rate hikes required by the end of the Summer. This makes 2 further 25bps rate hikes highly likely, leaving the bank to communicate the next steps for policy at the September Monetary Policy report – at which the deposit rate will sit at 4.25%.
- The bank hiked policy rates by 50bps to 3.75%, boosted rate path projections and flagged the August meeting as the next most likely rate hike. The board’s new rate path showed a higher peak rate, up to 4.21% in Q4'23 and Q1'24 (from 3.60% in March’s report), with the end-horizon rate boosted to 2.88% from 2.54%. The higher revision marked a 61bps upgrade for the peak rate from the March report – among the sharpest upward revisions for the very front-end of the curve since the beginning of the tightening cycle last year.
Full MNI review including sell-side views here: https://roar-assets-auto.rbl.ms/files/54290/MNINBR...
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BOE: Gilts Tick Higher As BoE's Bailey Comments On Inflation Forecasts
May-24 13:31
Gilt and Sonia futures have ticked up slightly as BoE Gov Bailey makes comments on "Inflation and the Economy". The event is media-only but a few headlines have crossed, with the limited market movement mostly reflecting the fact he's relaying views he's expressed before:
- Regarding today's surprisingly high inflation print - notes that they showed a welcome fall below double-digits. Says the BoE's projections show the gov't will meet its inflation target this year; but won't speculate on where April inflation data leaves the BoE's forecasts.
- Says that the focus has to be on food and core inflation; BoE will be watching the data for future rate decisions.
- Says that he doesn't think "spiral" is the right word to use re core inflation and wages.
- A: The forecasting is an organisational framework need to have a degree of consistency. Right that its not a good era for forecasting with a number of shocks. Still need forecast to organise the views on the MPC but have to be careful not to overly rely on them. All forecasts are conditional on market prices, asset prices, commodities, govt policies. Even commodity prices now are 10% lower now than when May forecasts were made.
- Also inflation is much more persistent, partly due to labour and firms holding on to workers as its so hard to recruit people.
US TSY FUTURES: BLOCK, Large Sep'23 2Y Buy
May-24 13:17
Large short end buy earlier at 0838:14ET, helped curve rebound off lows ahead the NY open:
- +17,360 TUU3 103-02.62, buy through 103-01.75 post-time offer; trades 103-03.5 last -.75
STIR: Effective Fed Funds Rate
May-24 13:14
FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 5.08% volume: $126B
- Daily Overnight Bank Funding Rate: 5.07% volume: $298B
