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Realistbear

Fed Futures Pricing In A Hike In June And Again In July

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http://www.iii.co.uk/news/?type=afxnews&ar...&action=article

NEW YORK (AFX) -- Following a bigger-than-expected rise in consumer inflation, the fed futures market now suggests that it is more likely than not the Federal Reserve will raise its target for overnight interest rates by a quarter of a percentage-point at its next policy setting meeting in late June. The U.S. Labor Department said its consumer price index rose 0.6% in April, and 0.3% if food and energy prices were excluded, vs. economist expectations of increases of 0.5% and 0.2%, respectively.
The July fed funds futures contract is implying a 56% chance of a rate hike, vs. a 36% chance prior to the release of CPI data. The futures are now pricing in a 76% chance that fed funds will be up to 5.25% from the current 5% after the next two Fed meetings, vs. a 60% chance prior to CPI data.

76% chance of a June hike to 5.25%

56% chance of a July hike to 5.50%

Time sell IR sensitive assets while you can.

Currencies moving: Pound down 2 cents to 1.88, Euro down 2 to 1.27

Edited by Realistbear

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Doesn't the article actually say a 56% chance of 5.25% at the June meeting, and a 76% chance of 5.25% at either the june or July meeting. In other words 76% chance of a single hike but no mention of the 5.5% hike you refer to.

I might be misreading, but that's how I read it.

Edited by Magpie

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Doesn't the article actually say a 56% chance of 5.25% at the June meeting, and a 76% chance of 5.25% at either the june or July meeting. In other words 76% chance of a single hike but no mention of the 5.5% hike you refer to.

I might be misreading, but that's how I read it.

76% chance of a June hike to 5.25%

56% chance of a July hike to 5.50%

Better than evens chance of a hike beyond June. Fed is currently 5.0%. The 76% chance of a hike in June takes the rate to 5.25%. The better than evens chance of a hike in July takes the Fed to 5.50%.

In other words IR hikes are more likely than not in the light of inflation and, possibly , the need to keep the dollar stable.

Edited by Realistbear

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76% chance of a June hike to 5.25%

56% chance of a July hike to 5.50%

Better than evens chance of a hike beyond June. Fed is currently 5.0%. The 76% chance of a hike in June takes the rate to 5.25%. The better than evens chance of a hike in July takes the Fed to 5.50%.

No, I'm pretty certain you're reading it wrong. It says:

."..the fed futures market now suggests that it is more likely than not the Federal Reserve will raise its target for overnight interest rates by a quarter of a percentage-point at its next policy setting meeting in late June. "

So the next meeting is late June...

"The futures are now pricing in a 76% chance that fed funds will be up to 5.25% from the current 5% after the next two Fed meetings"

So there is a 76% chance of rates being 5.25% after the next TWO MEETINGS - the June one (see above) and the July one - this is what this must refer to, not to the June meeting.

"July fed funds futures contract is implying a 56% chance of a rate hike" So this bit must be saying that the July fed fund futures contract is implying a 56% of a June hike (not after the July meeting as oyu imply).

So really it's 56% chance of a June hike, but if that doesn't happen it'll probably be in July instead - thus the higher 76% chance of a single rate cut at either the June or July meeting.

It's still bear news, as it means it's 76% likely that the rate will go to 5.25% in June or July - but it's not talking about the probability of two successive rises - that would probably be a bit less likely.

Edited by Magpie

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No, I'm pretty certain you're reading it wrong. It says:

."..the fed futures market now suggests that it is more likely than not the Federal Reserve will raise its target for overnight interest rates by a quarter of a percentage-point at its next policy setting meeting in late June. "

So the next meeting is late June...

"The futures are now pricing in a 76% chance that fed funds will be up to 5.25% from the current 5% after the next two Fed meetings"

So there is a 76% chance of rates being 5.25% after the next TWO MEETINGS - the June one (see above) and the July one - this is what this must refer to, not to the June meeting.

"July fed funds futures contract is implying a 56% chance of a rate hike" So this bit must be saying that the July fed fund futures contract is implying a 56% of a June hike (not after the July meeting as oyu imply).

So really it's 56% chance of a June hike, but if that doesn't happen it'll probably be in July instead - thus the higher 76% chance of a single rate cut at either the June or July meeting.

It's still bear news, as it means it's 76% likely that the rate will go to 5.25% in June or July - but it's not talking about the probability of two successive rises - that would probably be a bit less likely.

I'm feeling dizzy now :blink:

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I'm feeling dizzy now :blink:

Me too.. there's probably a 76% chance I'm wrong in any case... :blink:

Bear news either way though, so hold that thought.

Edited by Magpie

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Well I can't be certain about this since, according to a study conducted by Cornell University, 43% of all statistics are wrong.

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The July fed funds futures contract is implying a 56% chance of a rate hike, vs. a 36% chance prior to the release of CPI data. The futures are now pricing in a 76% chance that fed funds will be up to 5.25% from the current 5% after the next two Fed meetings, vs. a 60% chance prior to CPI data.[/indent]

I think Magpie's right: July is next meet, 56% chance of rise. 76% chance of rise to 5.25% after two meetings.

Reminds me of a problem a lecturer threw at me once: If I throw two dice, what's my probability of having at least one six?

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Well I can't be certain about this since, according to a study conducted by Cornell University, 43% of all statistics are wrong.

That study was never carried out, it is an urban myth, but we tend to agree with it

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I think Magpie's right: July is next meet, 56% chance of rise. 76% chance of rise to 5.25% after two meetings.

Reminds me of a problem a lecturer threw at me once: If I throw two dice, what's my probability of having at least one six?

11/36 now ask me another :lol::lol::lol:

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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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