The markets are clamoring for more interest-rate cuts from the Federal Reserve, placing 68% odds on a 50-basis-point cut and 100% odds on a 25-basis-point cut occurring at the Jan. 30 FOMC meeting.
Odds for a half-point cut were as high as 90% following the Fed's announcement. The market is placing 100% odds on the likelihood of 75 basis points in cumulative cuts occurring over the next two Fed meetings, which includes the March 18 FOMC meeting.
FOMC Meeting
Rate Cut Scenario, Odds
January 30th
68% odds of another 50 basis points in cuts (a 3.00% funds rate)
March 18th
100% odds of a cumulative 75 basis points in cuts; 12% odds of a cumulative 100 basis points in cuts
April 30th
100% odds of a cumulative 75 basis points in cuts; 86% odds of a cumulative 100 basis points in cuts (a 2.50% funds rate)
End of 2008
?100% odds of a cumulative 125 basis points in cuts; 50% odds of a cumulative 150 basis points in cuts (a 2.00% funds rate)
P.S. Will you be there when Cramer makes his next move?
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Tony Crescenzi Blog Ben Likes Surprises 1/22/2008 9:45 AM EST Look to his own study for explanation.
Tony Crescenzi Blog Rate Cuts Zoom 1/18/2008 3:15 PM EST The market is priced for a 2.375% fed funds rate at the end of 2008.
Tony Crescenzi Blog No Democrats Were There 1/18/2008 11:53 AM EST The crowd at President Bush's press conference did little to convince the stimulus package is here.
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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