|
(CEP News) - Fed fund futures traders further favoured the chances of a year-end rate hike by the Federal Open Market Committee on Tuesday, after Philadelphia Fed President Charles Plosser delivered hawkish commentary earlier in the day.
Plosser said inflation in the U.S. is "too high" and inconsistent with the goals of the Federal Reserve, whose accommodative policy must be reversed. Plosser, a well-known inflation hawk, also said monetary policy is too loose and the Fed will likely have to hike rates before an economic turnaround has taken place. Markets were 80.9% priced in for at least one 25bp hike at the FOMC's Dec. 16 meeting, up from 76% on Monday. Regarding the FOMC's September meeting, markets were 50.2% priced in that current 2.00% interest rates would be kept unchanged, down from 58.7% on Monday. "Odds of a hike in the Fed funds rate before year end fell to about a 50/50 proposition last week during the worst of the GSE jitters," wrote Reuters FX Hub analyst Jamie Coleman. "After a rebound in financial shares and hawkish comments from several Fed officials as well as the minutes from the June FOMC meeting, odds of a hike before year end are now better than 100%, suggesting slightly more than one 25bp increases is built in by the markets." Also on Tuesday, U.S. Treasury Secretary Henry Paulson, speaking at the New York Public Library, said Fannie Mae and Freddie Mac are vital to the U.S. financial system and that he remains confident Congress will pass GSE legislation sometime this week. While implied market probability was overwhelmingly leaning towards rates being held at 2.00% on Aug. 5, there was nonetheless a 2.3% increased chance, to 9.5%, of a 25bp hike from day-ago levels. All data taken at 3:20 p.m. EDT. By Ryan Szporer,
This email address is being protected from spam bots, you need Javascript enabled to view it
, with contributions from Patrick McGee,
This email address is being protected from spam bots, you need Javascript enabled to view it
and Erik Kevin Franco,
This email address is being protected from spam bots, you need Javascript enabled to view it
, edited by Cristina Markham,
This email address is being protected from spam bots, you need Javascript enabled to view it
CEP Newswires - CEP News © 2008. All Rights Reserved. www.economicnews.ca The Copying, Broadcast, Republication or Redistribution of CEP News Content is Expressly Prohibited Without the Prior Written Consent of CEP News. A copy of CEP News disclaimer can be found at http://www.economicnews.ca/cepnews/wire/disclaimer. |
