The US GDP report revealed personal income growth of a slightly stronger than expected 5.1% for total income and 12.5% for disposable income in Q1, after respective Q4 rates of 7.5% and 8.9%. Implied Fed funds futures rose in the wake of the data that showed an acceleration in core PCE inflation to a still too hot 4.9%. That goes against the FOMC’s criteria for a pause — evidence of a sustained trend toward the 2% target. A quarter point rate hike is built into the market as reflected by the May contract at 5.049% while June is at 5.115% and July at 5.052%.
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Head Market Analyst
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