Fed

The Fed has toned down its statement to give it flexibility to pause the interest rate hiking cycle in May depending on incoming economic data

Fed fund futures (FFF) suggest an 87.1% chance of 25bp hike for today's FOMC meeting - and I agree with that part. But what about the rest of the curve?

We agree with the market’s expectation that Jerome Powell and company are likely to deliver a 25bps interest rate hike this month, though we certainly wouldn’t be shocked to see the central bank hold fire for now.

The report printed in line with expectations at 6.0% y/y, the smallest annualized gain since September 2021

Weighing the data and our internal models, the leading indicators point to a slightly above expectation reading in this month’s NFP report - see why!

According to the CME’s FedWatch tool, investors are now pricing in a 60/40 shot of a 50bps rate hike in two weeks’ time and that rates could peak above 5.5%.

Some officials and Fed watchers have suggested a 50 basis-point move should be on the table if inflation fails to slow...

There is nothing in these FOMC minutes that should keep the central bank from raising interest rates “higher for longer” if US economic data continues to come in stronger than expected.

Will this finally be the reading that shows signals the tight labor market is easing?

Whilst the Fed effectively confirmed two more 25bp hikes to are to follow, Fed fund futures remain unconvinced and are pricing in a single hike to take rates to 5%.

Fed Funds futures traders are pricing in a full 50bps of interest rate cuts by the end of the year!

Stocks are heading southwards after Snap, a usual canary in the coal mine, posts the slowest revenue growth since going public in 2017 and as investors await the Fed rate decision.

The conclusion of the FOMC meeting at 19:00 GMT is hands down the main even, so we could be in for a session of tight ranges beforehand (and fireworks after).

The January Consumer Confidence report is a reminder that the US economy is like a rollercoaster ride, full of ups and downs.

The big question on everyone's mind is, will Fed Chairman Powell be able to pull off another successful performance?

Thankfully, some of the early data suggests that the US consumer remained healthy as of December, and that optimism is keeping expectations for the labor market elevated as well.

Stocks extend the selloff as hawkish guidance from the ECB adds to the Fed gloom.