Market pricing of end-2024 Fed Funds fell from 4.66% (67bp below the current level) before the July labour market data were released, to 3.85% just before the (stronger) ISM services data were released.
Market pricing of end-2024 Fed Funds fell from 4.66% before the July labour market data were released, to 3.85% just before the ISM services data were released. Jay Powell’s comments on Friday have taken end-year pricing back down to 4.2%, but the market remains doubtful they will cut by 50bp in September, Société Générale’s FX strategist Kit Juckes notes.
” “In Chair Powell’s view, the key lies with the labour market, which he mentioned 20 times in his speech on Friday. But while the labour market is clearly loosening there’s still huge uncertainty about how much it will slow. On that basis, while I doubt the market-implied terminal rate will head back up much now, the front end of the rates curve has too many rate cuts priced in over the next 6 month, unless the economy slows pretty sharply.
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