Fed: Odds of a September rate hike decrease - Rabobank

Michael Every, Head of Financial Markets Research at Rabobank, suggests that despite a barrage of recent “we are serious about hiking rates this time” rhetoric from the Fed, the Fed funds futures strip actually saw the odds of a September rate hike decrease from 42% to 36% and for a December move from 64.7% to 61.4% yesterday.

Key Quotes

“That was true even as US economic data saw an upward revision to personal income and spending, which edged the Atlanta Fed’s GDP Now (which I always think should have an exclamation mark after it – “GDP Now!”) live forecast up from 3.4% to 3.5%, while the important core PCE deflator, which the Fed likes best, also rose from 1.5% to 1.6% y-o-y.

Of course, the constant promise of monetary prudence combined with actual monetary flatulence, is the warm, toxic gas cloud which is lifting most asset prices at present, and it remains to be seen when/if central banks are prepared to inject more moral fibre into their diets. From their point of view, the longer they can keep assets elevated even as they admit defeat on the real economy, the better.”