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Fed Funds Futures Upped Odds Of A Hike To 92% Today

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Wednesday July 19, 02:59 PM
US inflation higher than expected
Underlying inflation in the US came in higher than expected in June, increasing fears of a further hike in the cost of borrowing.
The Labor Department said that core consumer prices, which exclude the volatile food and energy components, rose by 0.3 per cent, against analysts forecasts of a 0.2 per cent increase.
Core inflation has now climbed by 0.3 per cent for the past 4 months and means annual core inflation has reached 2.6 per cent, a level likely to cause a degree of concern among monetary policy makers.
“It tilts the pendulum in favor of another rate hike in August by the Fed,” said Omer Esiner, senior market analyst at Ruesch International.
The Fed Funds futures market reacted by increasing odds of an interest rate rise from 72 per cent on Tuesday to 92 per cent today.
Last week the odds were as low as 50 per cent.


My bet is another .25% in August. BoE no action.

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Looks like Ben wrongfooted the market again--stocks might suffer tomorrow?


Wednesday July 19, 04:24 PM

Treasuries rollercoaster as rate rises debated

Treasuries rose and yields fell on Wednesday, reversing their initial direction in a rollercoaster session where investors were buffeted between inflation data and a key Federal Reserve presentation.
Initially, a firm June consumer price index weighed on bonds and pushed yields higher as investors leant towards fully pricing in another quarter-point rate rise at the Fed’s August 8 meeting.
Consumer prices rose 0.2 per cent last month - as expected - but core inflation, which strips out food and energy costs, rose 0.3 per cent, more than expected.
While there are signs of some slight economic slowdown, which should damp inflation, investors fear price pressures in the short term could force the Fed to raise rates further.
Fed funds futures contracts implied the market was pricing in about a 90 per cent probability of an August rate rise to 5.5 per cent.
But the market then swung as Ben Bernanke, chairman of the Federal Reserve, failed to specifically endorse that view in testimony as he appeared before the Senate Banking Committee.Mr Bernanke warned of inflation risks in the near term but added that inflation should slow in the coming quarters.
“[it was] plainly obvious that the market was positioned for a hawkish testimony....
and did not find it in the headlines,” said Alan Ruskin at RBS Greenwich Capital, who warned interest rate sensitive markets could have a rough ride ahead, given the most the markets were priced for was a 5.5 per cent Fed funds rate, which could be reached in the next month.
”This suggests that there is a serious asymmetric risk in favour of the market getting more tightening than they are pricing in now,” he added.

Just show how finely balanced the Bull-Bear see-saw is. This is one heluuver nervous market. :)

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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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