Last week rates continued to move higher, and the curve steepened a bit. We’re now exactly two months removed from the FOMC’s first 50 BPS cut. At that point, the Fed’s terminal rate was 2.8%, and now it’s up to 3.8% with only three cuts priced in through the end of next year. Some of this change can be attributed to Powell’s speech in Dallas on Thursday, where he cited economic strength and sticky inflation leading to a hawkish pivot in their cutting strategy. Powell strictly said the Fed “does not need to rush to lower interest rates”.
CPI came in mostly as expected last week (2.6% YoY, up 0.2%). Core CPI came in at 3.3%, which was on top of expectations. PPI was slightly hotter than expected (2.4% vs 2.3%) and an increase from 1.9% the month prior. Retail Sales data was also strong last week.
This week will be quieter on the economic data front. There’s a bit of housing, manufacturing, and earnings data that we will look out for.
