Fed funds futures market now prices in 100 bps in easing next year

December 2024 Fed fund futures contracts now price in 100 bps in Fed cuts next year, up from 87 bps at the start of the day. The bulk of the move came after Fed Governor Chris Waller signalled that he was increasingly comfortable that rates at these levels are slowing the economy and that cuts could be on the table after ‘several’ more CPI readings showing a slowdown in inflation.

Throughout the month the market has been pricing towards a return to the ‘normal’ of low rates and low inflation but that accelerated intraday today with US 2-year yields falling by 9.2 bps to 4.76%. That would be the lowest close since early August.

The US dollar is falling alongside the repricing with USD/JPY now under heavy pressure, down 133 pips to 147.35. The low in November was 147.15 and that offers important support from here.

This article was written by Adam Button at www.forexlive.com.