Mike (Mish) Shedlock | Aug 19, 2015 05:53AM ET
The market still believes the Fed will hike rates in September or October. The CME's FedWatch Sees it like this.
That table is based on Fed Fund Futures and option bets. I highly doubt the Fed will think about a half-point hike no matter how strong the economic data between now and the September 16-17 meeting.
Fed Funds Futures expire on the last day of the month but settle at the average rate for 30 days prior.
Using Fed Funds Futures (not options) from August 18, I generated the chart and table below.
Implied Fed Funds Rate 2015-08-18
Comments
Let's assume the Fed actually does get a hike off in September if for no other reason than the market expects such a hike.
Based on Fed Fund Futures and FOMC Meeting Dates , and taking into account 30-day averages, the table of future rate hikes looks something like this.
Rate Hike Dates and Amounts
Month | Fed Funds Future | Implied Fed Funds Rate | Meeting Date | Market Expectation |
---|---|---|---|---|
Aug-15 | 99.863 | 0.138 | ||
Sep-15 | 99.815 | 0.185 | 16-17 | 0.250 |
Oct-15 | 99.755 | 0.245 | 27-28 | |
Nov-15 | 99.730 | 0.270 | ||
Dec-15 | 99.675 | 0.325 | 15-16 | 0.375 |
Jan-16 | 99.625 | 0.375 | 26-27 | |
Feb-16 | 99.585 | 0.415 | ||
Mar-16 | 99.535 | 0.465 | 15-16 | 0.500 |
Apr-16 | 99.475 | 0.525 | 26-27 | |
May-16 | 99.430 | 0.570 | ||
Jun-16 | 99.375 | 0.625 | 14-15 | 0.625 |
Jul-16 | 99.315 | 0.685 | 26-17 | |
Aug-16 | 99.255 | 0.745 | ||
Sep-16 | 99.220 | 0.780 | 20-21 | 0.750 |
Oct-16 | 99.155 | 0.845 | ||
Nov-16 | 99.075 | 0.925 | 01-02 | 0.875 |
Dec-16 | 99.010 | 0.990 | 13-14 | 1.000 |
Jan-17 | 98.970 | 1.030 | 31-01 | |
Feb-17 | 98.885 | 1.115 | ||
Mar-17 | 98.850 | 1.150 | 1.125 | |
Apr-17 | 98.795 | 1.205 | 1.250 | |
May-17 | 98.730 | 1.270 | ||
Jun-17 | 98.700 | 1.300 | ||
Jul-17 | 98.655 | 1.345 | 1.375 | |
Aug-17 | 98.600 | 1.400 | ||
Sep-17 | 98.560 | 1.440 | ||
Oct-17 | 98.520 | 1.480 | 1.5 | |
Nov-17 | 98.470 | 1.530 | ||
Dec-17 | 98.430 | 1.570 |
Fed Funds Futures strongly suggest the Fed will move to 1/8 point hikes, down from current moves of 1/4 point or more, and widely spaced at that.
Taking into account FOMC meeting dates, I created the following chart.
Fed Interest Rate Hikes and Dates (Implied from Futures)
Yellen vs. Greenspan
Measured Pace Revisited
Inquiring minds may wish to investigate my November 6, 2007 commentary on Greenspan's "measured pace", well ahead of the crisis: Greenspan on Housing, Central Bank, Gold .
Even at the above half-pace, half-measure set of market expectations, I suggest we will not see hardly any of those hikes.
Instead, I propose the Fed delayed hikes so long, that an interim recession will gum up the works leaving the Fed no room to cut.
My recession warming still stands.
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