US: Stay alert for Fed messaging – BNPP

Research Team at BNP Paribas, suggests that the ECB’s decision to leave policy unchanged may have refocused market participants on the possibility that the Fed sends a hawkish signal in the coming days before its pre-meeting quiet period begins next Tuesday.

Key Quotes

“It was reported that Governor Brainard would deliver a speech on the economy Monday and the possibility that this previously dovish FOMC member might sound more on board with resuming hikes given reduced international stresses might also have a factor.

In any event, at 44.5bp, the implied yield on the October Fed funds future remains well below the highs around 48bp seen in the aftermath of the August employment report. Ahead Friday, Fed Presidents Rosengren and Kaplan are scheduled to speak. They may sound sympathetic to a near-term rate hike, but markets are unlikely to reprice significantly absent a signal from a core member of the FOMC such as New York Fed President Dudley or Vice Chair Fischer. Neither are on the calendar at this point but we remain on watch for unscheduled interviews.”