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Fed Likely To Stop At 5%, Market Says

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http://www.marketwatch.com/News/Story/Stor...google&keyword=

Fed likely to stop at 5%, market says

Last Update: 3:01 PM ET Mar 16, 2006

WASHINGTON (MarketWatch) -- Financial markets are convinced that the Federal Reserve will stop hiking interest rates sooner rather than later.

Futures markets now expect the federal funds rate to peak at 5% in May, rather than at 5.25% in June as expected just four days ago. There's even a small chance -- about 1-in-6 -- that the Fed will call it quits after one more rate hike, leaving the fed funds rate at 4.75%. See interactive graphic tracking federal funds rate.

The rally in the federal funds futures market at the Chicago Board of Trade mirrors a big rally in the bond market Thursday. The yield on the 10-year benchmark note fell to 4.65% from 4.73% Wednesday. The 10-year was trading significantly below the 4.75% rate expected for the federal funds rate just two weeks hence. See Bond Report.

The federal funds futures market now appears convinced the FOMC will quit lifting rates once fed funds are at 5%. The Federal Open Markets Committee meets March 27 and 28, the first meeting under the Fed's new chairman, Ben Bernanke. Analysts and markets alike expect the FOMC to raise interest rates by a quarter of a percentage point to 4.75%.

After that, the outlook is hazy. The odds of a rate hike in May fell from 86% Wednesday to 65% Thursday. The odds were quoted at 100% Monday.

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The US and UK have been do some extremely creative accountancy. The only thing i see in the news is pointing down,high unemployement increased dept. Yet still they say that house prices are rising.

What has happened is people have felt richer than they are for a long time and now soon its gonner be pay back. People will feel poorer. The young have felt what its like to be on average wage of 24k and feel pretty skint where are the 'werthers originals' (its what i call people who bought before 2000) can be on 16k at saisbury checkout and have a higher standard of life.

I am waiting for the anikin skywaler to come and bring balance to this whole mess.

BTW

Cheers gordon.

And so ends my first post.

SSSSSSSSQqqqqqqqqueeeeeeeeek those last bit of juice out of me.

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If the Fed stop raising the rates it will be due to a slowing economy. The 11 of the 12 Fed regions all report a slowing housing market and many states are seeing a meltdown in prices (especially CA, the largest economy in the US and 6th in the world in particular) that may cause a recession. When the US goes into recession Europe follows with something worse.

If the US continue raising the rates together with the ECB the UK will have to follow suit or face a sterling crash. Oil prices moderated over the past few weeks but there are no guarantees going forward.

Either way, the business cycle is changing and the boom years are behind us for awhile. This is the downturn of the cycle and time to unload vulnerable assetts such as real estate.

http://wireservice.wired.com/wired/story.a...storyId=1174949

WASHINGTON (Reuters) - The U.S. Federal Reserve is likely to wrap up its campaign to boost interest rates by mid-year at the latest
as risks to the economy shift from inflation to slower growth
, a panel of chief bank economists said on Friday.

The downside to the business cycle. America catches a cold, what next for Europe?

Edited by Realistbear

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Sterling at 7-mth low vs euro, yield appeal fades

http://investing.reuters.co.uk/investing/f...RLING-CLOSE.XML

This is exactly what the BoE will have to contend with from now on in. They will have no choice but to raise rates.

Try reading this , it was written by Dr Sushil B Wadhwani in 2002 of the MPC. And explained that the pass through rates of inflation had fallen. It predicted if oil rose, it wouldn't have the same effect as in the past and exchange rates wouldn't either. Seems to me, they have this one right.

http://www.bankofengland.co.uk/publication...2/speech171.pdf

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http://www.marketwatch.com/News/Story/Stor...google&keyword=

Fed likely to stop at 5%, market says

Last Update: 3:01 PM ET Mar 16, 2006

WASHINGTON (MarketWatch) -- Financial markets are convinced that the Federal Reserve will stop hiking interest rates sooner rather than later.

Futures markets now expect the federal funds rate to peak at 5% in May, rather than at 5.25% in June as expected just four days ago. There's even a small chance -- about 1-in-6 -- that the Fed will call it quits after one more rate hike, leaving the fed funds rate at 4.75%. See interactive graphic tracking federal funds rate.

The rally in the federal funds futures market at the Chicago Board of Trade mirrors a big rally in the bond market Thursday. The yield on the 10-year benchmark note fell to 4.65% from 4.73% Wednesday. The 10-year was trading significantly below the 4.75% rate expected for the federal funds rate just two weeks hence. See Bond Report.

The federal funds futures market now appears convinced the FOMC will quit lifting rates once fed funds are at 5%. The Federal Open Markets Committee meets March 27 and 28, the first meeting under the Fed's new chairman, Ben Bernanke. Analysts and markets alike expect the FOMC to raise interest rates by a quarter of a percentage point to 4.75%.

After that, the outlook is hazy. The odds of a rate hike in May fell from 86% Wednesday to 65% Thursday. The odds were quoted at 100% Monday.

Maybe not......

http://www.thestreet.com/_tsclsii/markets/...s/10274270.html

Bond Brief: Technical Correction

By Katie Benner

TheStreet.com Staff Reporter

3/17/2006 10:31 AM EST

Treasury prices fell Friday, but the market headed for its biggest weekly gain since early September, when traders bet that damage done by Hurricane Katrina would push the Fed to stop raising interest rates.
This time around, tamer-than-expected inflation readings have spurred traders to scale back bets on how high the Federal Reserve will raise interest rates this year.
"
This dip in prices is nothing but a bit of a selling from those who were fortunate enough to be long yesterday,"
says Bernd Wuebben, senior bond market strategist at BNP Paribas. "It's a bit of a technical correction."
David Ader, bond market strategist at RBS Greenwich Capital, is also comfortable with the market pricing in 100% odds that the rate will hit 5%, and says people are overdoing recent comments from Federal Reserve official Janet Yellen.

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I think you're partially correct. At present, I can't see more that two 25BP raises in UK repo rate before the year ends. We may see a hike in June/July and then one at the end of the year (Oct?). It all depends on what the ECB and BOJ does.

Irrespective of oil prices, the Western world has been on a huge borrowing binge and that will eventually find it's way into inflation and more importantly for the central banks economic instabilities that can only be rectified with tighter credit controls (i.e. higher interest rates).

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I think you're partially correct. At present, I can't see more that two 25BP raises in UK repo rate before the year ends. We may see a hike in June/July and then one at the end of the year (Oct?). It all depends on what the ECB and BOJ does.

Irrespective of oil prices, the Western world has been on a huge borrowing binge and that will eventually find it's way into inflation and more importantly for the central banks economic instabilities that can only be rectified with tighter credit controls (i.e. higher interest rates).

For now at least, it appears that the BoJ are out of the picture. They have cried wolf again and the world shuddered and then got back to business as usual. Shows how much damage a small IR hike from Japan will eventually cause--the ripple effect.

The UK and US are teetering on the brink of recession and at the same time have a serious problem with HPI and mounting debt that has been facilitated by the assett bubble.

The HPC may just happen without IR having to move as they are, in effect, higher than at any time in recorded history when looking at the affordability and income multiples.

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I think you're partially correct. At present, I can't see more that two 25BP raises in UK repo rate before the year ends. We may see a hike in June/July and then one at the end of the year (Oct?). It all depends on what the ECB and BOJ does.

Irrespective of oil prices, the Western world has been on a huge borrowing binge and that will eventually find it's way into inflation and more importantly for the central banks economic instabilities that can only be rectified with tighter credit controls (i.e. higher interest rates).

Where are you getting these figure from, everyone is expecting flat rates for the UK

Sept 06 95.37 (100-95.37-0.15) give 4.48% so a slight chance of a cut

Dec 06 95.32 (100-95.32-0.18 gives 4.50% so flat

http://www.futuresource.com/quotes/custom....us=LSS&t=Future

and the repo rates

from here

16-Mar1W	4.515002W	4.488333W	4.468331M	4.455002M	4.445003M	4.440006M	4.466679M	4.510001Y	4.54333

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Where are you getting these figure from, everyone is expecting flat rates for the UK

I'm not.

Nor, for that matter are a large fraction of the people buying houses right now: many seem convinced that rates are going to be cut.

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The $64,000 question is can the US maintain 3% GDP growth (if you believe Fed figures), without recourse to a continuation of unsustainable debt driven consumer spending. The housing bubble ‘equity release’ easy credit tap (faucet) is slowing to a trickle. Income growth has fallen across the States since 2000, manufacturing employment has tumbled, productivity is continuing to fall. My guess is that the US economy is about to enter a prolonged deflationary period.

Consider this; why is it that Japan and Germany have been unable to shrug off deflation during a period when consumers across the globe have been on a massive spending spree?. Even after several years Japan is unable to move the cost of borrowing above nada.

We in the West are experiencing the inevitable impact of a global economy and as David Ricardo said 150 years ago,

Labour is cheap when it is plentiful.

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The $64,000 question is can the US maintain 3% GDP growth (if you believe Fed figures), without recourse to a continuation of unsustainable debt driven consumer spending. The housing bubble ‘equity release’ easy credit tap (faucet) is slowing to a trickle. Income growth has fallen across the States since 2000, manufacturing employment has tumbled, productivity is continuing to fall. My guess is that the US economy is about to enter a prolonged deflationary period.

Consider this; why is it that Japan and Germany have been unable to shrug off deflation during a period when consumers across the globe have been on a massive spending spree?. Even after several years Japan is unable to move the cost of borrowing above nada.

We in the West are experiencing the inevitable impact of a global economy and as David Ricardo said 150 years ago,

Labour is cheap when it is plentiful.

"US economy is about to enter a prolonged deflationary period."

IMHO, the most likely scenario. The Fed will stomp on inflation hard and yet the economy is slowing naturally due to high oil prices and indebtedness. Long lasting slump. Moderate recession perhaps and worse for Europe.

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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