Something for your Espresso: “A lack of further progress so far this year on returning to our 2% inflation goal.”
Morning from Europe.
Powell (finally) admitted to the lack of progress on inflation over the past 3-4 months, but the interesting thing is that an implicit bias towards lower rates is still kept intact.
FOMC members are still stuck in a debate on WHEN to cut interest rates but there is no real open door for a discussion on whether the equilibrium rates have actually moved substantially up given the current re-acceleration of growth- and inflation despite “restrictive rates levels”.
We continue to see U5’s or Z5’s as the most obvious expressions of a continued hawkish USD rates environment as the next leg in the “high for longer” narrative centers around 2025 forward pricing.
Chart 1: SOFR forward pricing
Powell admitted to the lack of progress on inflation in recent months, but the implicit bias is still dovish. The debate is still centered around WHEN rates will come down, not around IF rates will come down.
0 Comments