FED: Minneapolis' Kashkari Eyes "Extended" Wait Before Moving On Policy
Mar-26 15:06
Minneapolis Fed President Kashkari (non-2025 FOMC voter but votes in 2026) didn't go deeply into current monetary policy considerations at a "Fed Listens" town hall event. But he did make some comments on inflation and policy uncertainty that were consistent with his thinking last month when he said he expected that rates would be "modestly lower" at end-2025.
- Kashkari on inflation progress: "We've made a lot of progress in bringing inflation down... It's above our 2% target. So we have more work to do. That's a big challenge and we're very focused on that and hopefully we can do that while keeping the job market strong...We're trying to land the plane, so to speak... I think the biggest challenge for us right now is to finish the job, and some of the policy uncertainty ... is complicating our analysis of the economy."
- On the uncertainty of tariff impacts: "tariffs on one hand push up prices a little bit. So maybe that's inflationary ... [with] a higher interest rate path if prices are higher. But then they're also slowing economic activity, which would push down interest rates, all else being equal. I look at those two things and say, okay, just it's kind of a wash. [Let's] just sit where we are for an extended period of time until we get clarity."
- (He had said in early February: "We’re in a very good place to just sit here until we get a lot more information on the tariff front, on the immigration front, on the tax front… I would expect the federal funds rate to be modestly lower at the end of this year").
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EUROPEAN INFLATION: PCCI Eases Slightly In January
Feb-24 15:01
The ECB’s persistent and common component of inflation metric fell 5bp to 2.11% in January, still slightly above the 2024 average of 1.97% but broadly in line with the 2% inflation target. The data should support Governing Council dove’s confidence in the inflation outlook, even as domestic spot inflationary pressures remain evident.
- PCCI is the ECB’s preferred measure of medium-term inflation pressures, and is constructed “by estimating a dynamic factor model that extracts the persistent and common component of inflation from granular price data at the item-country level”.
- Core PCCI (i.e. excluding energy and food) was little changed at 1.90%, while Supercore (“which picks out those items that are estimated to co-move with the business cycle”) eased a tenth to 2.7%.
- The weighted median metric saw a notable 3 tenth increase to 2.8% for its highest since May 2024. Meanwhile, the 10% and 30% trimmed mean series were each 2.5% Y/Y.
STIR: GBP STIRs Still Price Over 50bp Of Cuts Through Year-End
Feb-24 14:58
Little net movement in GBP STIRs today.
- BoE-dated OIS still prices a little over 50bp of cuts through year-end, while SONIA futures are -1.0 to +2.5.
- No comments of note so far from the BoE’s BEAR conference.
- Vicky Saporta, Executive Director of the Markets Directorate at the Bank has noted that the Bank is closely monitoring the move higher in SONIA rates, with the SONIA overnight/bank rate spread moving sub 5bp in recent weeks.
- Previous BoE staff work (predictably) noted that "as liquidity draining progresses, banks may have to compete more for overnight funding and lenders may be able to demand a better return on their deposits, pushing rates higher and moving SONIA closer to Bank Rate."
- Comments from BoE dove Dhingra are due this evening (18:00 GMT), after she was reappointed for a second term earlier today.
- Don’t expect a change in tone as she speaks on “Bracing for turbulence: UK inflation and prospects for monetary policy.”
- Deputy Governor Ramsden’s Friday address is likely to garner the most market interest when it comes to this week’s boE-speak, as mentioned earlier.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA Rate (bp) |
Mar-25 | 4.445 | -0.9 |
May-25 | 4.258 | -19.7 |
Jun-25 | 4.192 | -26.2 |
Aug-25 | 4.060 | -39.4 |
Sep-25 | 4.017 | -43.8 |
Nov-25 | 3.946 | -50.9 |
Dec-25 | 3.927 | -52.7 |
FOREX: Equity Sell-off Sees E-mini S&P Through Friday Low; Boosting USD
Feb-24 14:55
- Currency futures volumes picking up nicely on the back of the extension higher in the dollar - particularly evident in GBP/USD, which sees some of the best volumes of the session so far to press GBP/USD to 1.2613 lows.
- USD gains are pretty universal in recent trade, helped higher by the slippage in US stock futures and US yields after the cash equity open. The sell-off is extending at typing, showing through the Friday low of 6024.50, and narrowing the gap with 6014.00 and 6020.75 - both consequential levels.
- Trump is set to be meeting his French counterpart across several sets of meetings today, culminating in a press conference alongside Macron at 1930GMT/1430ET - at which markets will look to gauge whether the French president has been successful in getting Trump to dial-down his approach to Moscow as part of the effort to end the war in Ukraine.
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