📝 Markets Near Fully Priced A 50Bps Hike In May: Wells Fargo Securities

A hawkish or dovish move from the central bank might hinge on a nonfarm payrolls miss of 100K. Today, the employment report still contains relevant information for the FOMC, but it largely has taken a backseat to the inflation data. Chair Powell repeatedly has characterized the labor market as "extremely tight", and lackluster labor demand is clearly not a major challenge facing the U.S. economy at present. Monthly employment gains of more than 400K are more than enough to absorb any remaining labor market slack. We believe at least a 25 bp rate hike is locked for the May 3-4 FOMC meeting, and the door is now wide open for a 50 bp rate hike if the FOMC wants to walk through it. As of this writing, markets are nearly fully priced for a 50 bp hike in May, and we would not be surprised if the FOMC seizes the opportunity to accelerate the removal of monetary policy accommodation. The April 12 CPI release could be the final indicator that pushes markets to fully price a 50 bp hike for the May FOMC meeting.- Wells Fargo Securities