![]() ![]() The implication is that rates will be cut by 150 bp between tomorrow and July 31. We are shocked to see that for the July 31 meeting, 50.2% see the rate at 3.25-3.75% while only 0.1% see the current 4.50-4.75% and that’s before today’s 25 bp hike. We think the market will hear “pause” whether he says it or not, and that will give weight to the gang who see rate cuts before year-end. The probability of the 25 bp hike is now 87.8% at the CME Fed Watch tool but the jury is out of whether Powell hints at a pause from now on. With inflation stickier than thought, it’s hard to see any reduction in the terminal rate at 5.25%. He may have to tap dance around quantitative tightening, apparently on hold over the past week and intrinsically conflicting with pouring cash into the banks. ![]() At a guess, he will stick to his knitting on rates and defer talk of regulation. The press is going to hector him on why Silicon Valley was not better supervised and what other new steps will be taken to protect the system. Fed chief Powell is almost sure to take the view that all that is left is mopping up. Bloomberg opines that yesterday we had “modest optimism that the banking crisis is contained to a few idiosyncratic institutions” in a fast-moving cycle. Outlook: We get the Fed decision today at 2 pm and the press conference starts at 2:30, a half hour before FX futures close and late in the day for everyone else, too. ![]()
0 Comments
Leave a Reply. |