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US House GOP McHenry says nothing close to being done on debt ceiling talksMORNING MINUTE EQUITIES, FUTURES & OPTIONS MAY 19th

Darren Krett

Thursday, 18 May 2023

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END OF DAY REPORT EQUITIES, FUTURES & OPTIONS

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HIGHLIGHTS

Fed's Logan (voter) says data at this time does not support justifying a pause in June; inflation and employment data in coming weeks could change that view, but not there yet - CNBC citing prepared remarks

Fed's Logan (voter) says she is keeping an open mind ahead of the June meeting, but data does not yet show skipping rate hike at June meeting is appropriate, she is concerned about whether inflation is falling fast enough Policy/Economy Have not yet made the progress we need to make It is a long way from here to 2% inflation.

Inflation is much too high, restoring price stability is a critical priority. Inflation is down from 2022 peaks, labour market has cooled and the economy is less out of balance. Recognises arguments against tightening policy too much or too fast. The effect of banking stress so far is comparable to a 25 or 50bp Fed policy hike. Managing risks must not stop Fed from returning inflation to the target. Banking Every bank in the US should be fully set up at Fed's discount window and run regular tests. Banks should consider establishing access to the Fed's standing repo facility. Fed is working to accelerate the setup process for the discount window access Fed should consider expanding discount window operating hours Consider the potential benefits of centrally clearing standing repo facility operations

Fed's Bullard (non-voter) says higher rates are insurance against inflation; he will keep an open mind going into the June meeting, but is inclined for another hike - FT interview Reiterates view that fall in Treasury yields offsets banking sector tightening. Still believes rates are at the low end of 'sufficiently restrictive', with the top-end seen above 6%, "better and more prudent to be in the middle of the zone".

Fed's Jefferson (voter) says inflation is "too high" and by some measures progress is slowing, but a year is not long enough to feel the full effect of interest rate hikes so far Baseline outlook is not for a recession, but growth has "slowed considerably", expects job growth to also decline and unemployment rate may rise. Evidence so far points to only a "modest incremental tightening" of credit conditions due to recent bank stress. Remains uncertain how tighter credit will influence household and business spending. Inflation in nonhousing services has shown "no signs of significant decline". Will consider "all these factors" in deciding appropriate stance of monetary policy.

US House Speaker McCarthy expects the House will vote next week if an agreement is reached, according to Politico's Everett

SUMMARY

 A slew of hawkish Fed speak caused money markets rates to creep up to a 40% implied June hike vs 20% on Wednesday, so I expect there will be much attention on Chair Powell's comments Friday to see whether he has a whetted appetite for a June hike.

MARKET SNAPSHOT

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TODAY'S MOVERS

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TODAY'S NUMBERS

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ON THE TICKET TOMORROW

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