US STOCKS: Late Equities Roundup: US/China Talks in London Next Week

• Powell unsurprisingly downplays question on political pressure. Doesn't affect doing our job at all. We are always going to consider only the economic data, the outlook, the balance of risks, and that's it.

• Q: How much weakness does the committee need to see in the labor market and the economy more broadly to lower interest rates again? Is it about a certain increase in the unemployment rate over a period of time or perhaps a certain number of negative monthly job reports? I mean, how are you making that assessment?
  • A: We don't see that yet. We have 4.2% unemployment, good participation, wages behaving very well, participation, I mentioned, at a good level. So, with the labor market, we would look at the totality of the data. We would look at the level of the unemployment rate, we would look at the speed with which it's changing. We would look at the whole huge array of labor market data to get a sense of whether conditions are really deteriorating or not. And at the same time, we would be looking at the other side of the mandate. We could be in a position of having to balance those two things, which is, of course, a very difficult balancing judgment that we would have to make.
• Q: You have mentioned that the committee would consider how far the economy is from each goal and the time it would take to kind of get back to that point. But what does this mean in practice? How much of that assessment will be rooted in a forecast versus data dependence?
  • A: It would be a combination of the two. Not the situation we are in. Hypothetically, would look how far these developments are from the goals, how far they are expected to be from the goals, what's the expected time to get back to their goals. We would look at all those things and make a difficult judgment and that's in our framework. It's always been in our thinking. We haven't faced that question in a very long time. It’s not one that we face today. And we may never face it.

Bearish shift in SOFR option trade after the FOMC steady rate annc, option focus fading the immediate bounce in rates. That said, SOFR futures have reversed course and trading lower. 

• Following earlier call sales, put buying includes:
  • +20,000 SFRU5 95.75.95.87 2x1 put spds, 1.75 ref 96.14
  • +10,000 SFRU5 95.75 puts, 2.25 ref 96.155