Daily Flows & Insights – US Fed Not Done Taming Inflation

Daily Flows

  • Yesterday, The term deposit yield curve priced down around 5 basis points from 6 months onwards.
  • That being said, market participants were still able to pick up discretionary offerings of 5.75% for 1 year from BBB+ rated names.
  • NCD margins are being offered at +55 for 3 months today.

US Fed Not Done Taming Inflation

  • Last night the minutes from the Fed’s recent meeting showed that most Fed members agree that their job taming inflation is not yet done.
  • Despite the unanimous decision in the end to leave rates on hold, some members had considered a 25bp hike at the meeting.
  • With almost all members expecting further tightening to come at some point, the market is now nearly fully priced for a hike later this month.
  • Members expectations for further tightening seem at odds with the Fed staff’s economic forecasts.
  • Current Fed forecasts point to the US economy entering a mild recession later this year.
  • Before we get to the next Fed meeting, CPI will be out next week with another sharp fall in the headline rate of inflation expected.
  • However core inflation is expected to remain sticky, keeping pressure on the Fed.
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Curve Team
David Flanagan