[MARKET UPDATE] Money Markets now assign a 10% probability of a 50bps Fed hike in December following hot US CPI and commentary from Fed Governor Waller this morning
ORIGINAL · Newsquawk[MARKET UPDATE] Money Markets now assign a 10% probability of a 50bps Fed hike in December following hot US CPI and commentary from Fed Governor Waller this morningRead originalHide original
Implied bps priced in by the market post and pre-CPI; calculated via CME FedWatch Dec: 27.6bps (prev. 24.7bps) Jan 37.9bps (prev. 33.9bps) Mar 52.6bps (prev. 46.6bps) Apr 57.4bps (prev. 51.3bps) Jun 65.8bps (prev. 57.9bps) Jul 66.7bps (prev. 58.3bps) Sep 67.6bps (prev. 59.5bps) Oct 66.6bps (prev. 58.9bps) Dec 63.0bps (prev. 55.7bps) A 25bps hike is now fully discounted for December, with a slight probability of a 50bps move now being priced. Earlier today, Fed's Waller stated that further policy tightening is needed and a half point rate hike may be needed if October core CPI inflation comes in around 0.3% or higher - which it ultimately did. He also acknowledged at minimum they need to take back the three insurance cuts but he is not looking to tighten by 150 or 200bps. The hawkish commentary and hot October CPI inflation now has the market pricing in between two and three hikes from now to end-2027.
The November 10 update reported higher post-CPI rate pricing, a fully priced 25-basis-point December hike, and a 10% probability of a 50-basis-point move.
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Implied bps priced in by the market post and pre-CPI; calculated via CME FedWatch Dec: 27.6bps (prev. 24.7bps) Jan 37.9bps (prev. 33.9bps) Mar 52.6bps (prev. 46.6bps) Apr 57.4bps (prev. 51.3bps) Jun 65.8bps (prev. 57.9bps) Jul 66.7bps (prev. 58.3bps) Sep 67.6bps (prev. 59.5bps) Oct 66.6bps (prev. 58.9bps) Dec 63.0bps (prev. 55.7bps) A 25bps hike is now fully discounted for December, with a slight probability of a 50bps move now being priced. Earlier today, Fed's Waller stated that further policy tightening is needed and a half point rate hike may be needed if October core CPI inflation comes in around 0.3% or higher - which it ultimately did. He also acknowledged at minimum they need to take back the three insurance cuts but he is not looking to tighten by 150 or 200bps. The hawkish commentary and hot October CPI inflation now has the market pricing in between two and three hikes from now to end-2027.
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