Only fractional odds of an interest rate cut are built into federal funds futures, with the market leaning more heavily toward the idea of a rate hike occurring by year's end. The market is priced for 8% odds that the Fed will cut the funds rate by 25 basis points at the June 25 FOMC meeting, up from 6% odds yesterday. For the Aug. 5 FOMC meeting, the market is priced for virtually no chance at a rate cut, as the passage of time is expected to bring the economic and financial situation more in balance and give the Fed leeway to reverse its rate cuts and focus more on the incipient acceleration in inflation.
The market is priced for the Fed to boost the funds rate by 25 basis points in December and by another quarter point in the first quarter of 2009. This seems a bit aggressive at the present time, since the Fed is likely to wait a number of months after the economy has shown signs of stabilizing before even considering a hike.
Tony Crescenzi Blog Mortgage Apps Flat 5/14/2008 12:10 PM EDT The numbers continue to hang around five-year lows.
Tony Crescenzi Blog CPI Data Leave TIPS Unchanged 5/14/2008 10:46 AM EDT Consumers, though, expect worse inflation, and that might be more important.
Tony Crescenzi Blog CPI Helped by Wages 5/14/2008 9:56 AM EDT The core numbers come in slightly better than expected.
Tony Crescenzi is the chief bond market strategist at Miller Tabak + Co., LLC, and advises many of the nation's top institutional investors on issues related to the bond market, the economy and other macro-related issues. At the request of the Federal Reserve, Crescenzi is a regular participant in the board's Livingston Survey of economic forecasters. He is also the author of the revised investment classic, The Money Market,
first published in 1978 by Marcia Stigum, and The Strategic Bond Investor. At the time of publication, Crescenzi or Miller Tabak had no positions in the securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Crescenzi also is the founder of Bondtalk.com, a popular Web site covering the bond market and the economy. Crescenzi appreciates your feedback; click here to send him an email.
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