After comments from Jerome Powell that rates may need to be higher to keep fighting inflation, the odds of another #ratehike at the November FOMC meeting have risen to 50%, as discounted by futures. Although a volatile measure, it’s proven to be a good tool to predict fed actions. If the probability is higher than 80%, the #fed feels comfortable is not surprising the market and usually acts as predicted by futures. But not only fed funds are going higher, the 2 year treasury bond, the most sensible one to fed actions is back above 5%, and the 10 year treasury yield is also up to 4.20%, having the whole curve on positive real terms, and going higher, as consensus is starting to play with the idea of economic soft landing. Some consumer measures are deteriorating rapidly, such as household debt and savings, but as long as unemployment is resiliently low, Powell will continue to push the brakes on the economy.
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Chart source: Bianco research
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