Minutes to the Federal Reserve's Aug. 5 FOMC meeting will be released at 2 p.m. and will be scrutinized for evidence of the Fed's leaning toward interest rate hikes. In the aftermath of Fed Chairman Ben Bernanke's speech in Jackson Hole, Wyo., last week, chances of a rate hike are believed to have fallen.
Fed funds futures are now priced for just 32% odds of a hike occurring by the end of this year, down from 100% odds on the eve of the Fed's meeting three weeks ago. Looking further out, the market now sees a 2.26% funds rate at the end of the first quarter of 2009, down from 2.53% ahead of the Aug. 5 meeting.
To be sure, participants and observers of the Fed's Jackson Hole gathering are divided about what they heard both on and off the record.
Most agree that the Fed is concerned more about downside risks to growth than about inflation in the near term, but there is division over what the Fed's stance is regarding the longer-term outlook. In particular, the question for today is whether the Fed's expectation for a moderation in inflation is great enough that it would consider cutting interest rates if the economy begins to slide in the fourth quarter as many now expect, or whether the Fed would rather stay vigilant if growth weakens and tighten faster when a recovery begins.
P.S. Will you be there when Cramer makes his next move?
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Tony Crescenzi Blog New Home Supply Plunges 8/26/2008 10:39 AM EDT This appears to be the largest monthly drop on record.
Tony Crescenzi Blog Case-Shiller Stabilizing 8/26/2008 9:35 AM EDT This reading is at odds with a separate government measure of home prices.
Tony Crescenzi Blog Bank Credit Jumps 8/25/2008 2:52 PM EDT The Fed is likely behind the influx.
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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