Fed funds futures are slightly lower after core CPI surprised on the hotter side
Fed funds futures are slightly lower after core CPI surprised on the hotter side. However, the slip in prices is minimal and implied rates are still suggesting only about 3 bps of tightening over the first half of the year, while deferred contracts suggest no policy changes into 2020, with small risk of an easing into mid-2020. Analysts continue to believe the market is under-appreciating the Fed and that it's only a matter of time (say late Spring) before growth worries abate. Analysts project Q1 growth of about 2.4% versus an expected 3.2% clip in Q4 (data due February 28), significantly better than Harker and various other forecasters, with a 3.0% pace in Q2. That should be sufficient, assuming inflation doesn't tick down, to engender another tightening from the FOMC at the June 18, 10 meeting.