Fedspeak Monitor: Waller starts the pushback on lower Fed pricing; Brainard key next
Summary: We are launching a Fedspeak Monitor to keep a close check on the comments from Fed members. While most members continue to tilt hawkish for now, investors remain on edge expecting a Fed pivot. We need to see more dissenters at the FOMC voting and a bigger dovish tilt in the commentaries before a pivot can be seen. We think we are not there yet, and a further pushback on lower expectations of the Fed’s terminal rate pricing may be on the cards.
We have created a new Fedspeak monitor to gauge the latest comments from the Fed members. This will be key to track as investors remain on the edge to expect a Fed pivot. After a weaker than expected US CPI print last week, the pricing for terminal Fed rate has dropped below 5%. Fed member Waller was on the wires today, sending a clear message that rates will be higher-for-longer and one CPI print cannot change that. Equity markets have reversed some of the gains, but US 10-year yields are still capped below 3.9% for now.
Fed’s Vice Chair Brainard will be key ahead, given her usual dovish lean. The most dovish messages we have got so far in the current cycle have been on being “data-dependent” and to look at “cumulative tightening”. However, the significant easing in financial conditions since last week’s October CPI will largely mean that the Fed needs to up its hawkish rhetoric in the weeks ahead.
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