Fed Officials Rule the Calendar Today

Rates trade within a tight range while Fed officials discuss future policy decisions. Rates closed 1-4 bps higher across most of the curve after trading within a ~6 bp range throughout the session. Rates were largely unaffected by economic data that showed a contraction in the U.S. manufacturing sector, while dovish comments from Fed Governor Waller likely contributed to a decline in rates in the afternoon. Markets continue to look ahead to Chair Powell’s moderated discussion on Wednesday and labor market figures on Friday for direction on the Fed’s upcoming policy meeting.

Waller offers a clear stance on the Fed’s December meeting. Fed Governor Waller said today that he leans “toward supporting a cut to the policy rate at our December meeting.” He caveated that statement with the Fed’s usual line about data dependency, but in the grey world of Fedspeak, his relatively explicit guidance may be a valuable data point. Fellow voter Atlanta Fed President Bostic was a bit more restrained in an essay released today, where he wrote that he is unsure if a rate cut is needed in December, but believes inflation is sustainably declining despite bumpy data and that the Fed “should begin shifting monetary policy toward a stance that neither stimulates nor restrains economic activity.” New York Fed President Williams, another voter, was similarly balanced today when he said that the Fed will likely need to lower rates further but refrained from saying how he plans to vote in December.

U.S. manufacturing sector contracts again in November. The ISM manufacturing index was slightly higher than expected in November, landing at 48.4 versus the 47.5 forecast. That marked the softest sector contraction since June, which was also the last time the index climbed above 48.0. New orders (50.4) hit their highest level since January and largely drove the rebound, also helped by easing price pressures. Trump’s proposed tariffs against China, Europe, and North American countries could lead to a surge in domestic manufacturing if businesses can quickly move production back to the U.S.