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(CEP News)- Fed funds futures are fully priced in for a 75bps rate cut by the FOMC meeting set for Dec. 16 following a drop in U.S. Pending Home Sales.
The implied probability for 75bps Fed rate cut jumped to 100% from 78% a day ago. Earlier today, pending home sales tumbled less than expected with a 0.7% decline in October, according to the National Association of Realtors (NAR). The index now stands at 88.9, down from an upwardly revised 89.5 reading in September. Economists at RDQ are predicting that the Fed will only cut rates by 50bps at next week's meeting. "The FOMC meets next Monday and Tuesday (December 15/16) is expected to cut the fed funds target rate by 50bps to 0.50% on Tuesday (not that the target fed funds rate is particularly relevant-since the FOMC cut the target rate to 1.00% on October 29, the effective fed funds rate has averaged 0.36% and the effective rate has averaged 0.12% in the last two days)," they wrote. T.J. Marta, Fixed income Strategist is also pricing in a 50bps cut. "The market retains its call for the Fed to either not cut rates further or to cut but then begin to hike in late '09," Marta wrote. "Either way, we disagree, as we forecast the Fed will cut the target rate 50bp at the Dec meeting and leave rates on hold throughout 2009." By Steve Stecyk,
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, edited by Megan Ainscow,
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