BNY's John Velis says that interest rate markets, which are a big factor in the US Dollar, still expect about two Federal Reserve rate cuts this year. This is even though the Fed's minutes showed a more cautious stance, inflation remains high, and GDP growth has slowed. He points out that a full 25 basis point cut is only completely reflected in the market by July. BNY Markets still thinks there will be three rate cuts in the second half of the year.
OIS pricing stays strong despite the release of more aggressive economic data.
The market hasn't changed much in its expectation of two rate cuts this year, and the DEC26 Overnight Indexed Swap (OIS) suggests about 60 basis points of more relaxed monetary policy.
You have to check all the way up to the July meeting to see the full cut being priced.
This is not very far from where we are now, and we are still waiting for three 25 basis point cuts later in the year because the labor market is getting weaker.
The minutes had a slightly hawkish tone, mainly because it was reported that several members said they would have backed a two-sided view of the Committee's future interest rate decisions, showing that raising the target range for the federal funds rate might be necessary if inflation stays higher than the target.
We think that if our understanding of the U.S. labor markets comes true later this year, even if inflation stays high, the Fed will adjust interest rates to match the part of its job that focuses on achieving full employment.
OIS pricing stays strong despite the release of more aggressive economic data.
The market hasn't changed much in its expectation of two rate cuts this year, and the DEC26 Overnight Indexed Swap (OIS) suggests about 60 basis points of more relaxed monetary policy.
You have to check all the way up to the July meeting to see the full cut being priced.
This is not very far from where we are now, and we are still waiting for three 25 basis point cuts later in the year because the labor market is getting weaker.
The minutes had a slightly hawkish tone, mainly because it was reported that several members said they would have backed a two-sided view of the Committee's future interest rate decisions, showing that raising the target range for the federal funds rate might be necessary if inflation stays higher than the target.
We think that if our understanding of the U.S. labor markets comes true later this year, even if inflation stays high, the Fed will adjust interest rates to match the part of its job that focuses on achieving full employment.
