Fed Yap Vs. Futures; Bloomberg Vs. CME; Eighth-Point Baby Hikes!

Odds Rise as Fed Governor Lockhart Speaks

The Financial Times reports September Rate Rise Odds Improve as Lockhart Speaks. 

 Expectations that the Federal Reserve will lift interest rates in September popped on Tuesday after Dennis Lockhart, president of the Atlanta Fed, said there would need to be a “significant deterioration” in economic activity to prevent the central bank from moving after its next monetary policy meeting.

Federal funds futures imply a 48 per cent probability that the Fed will lift rates in September, up from just 38 per cent on Monday, according to data and calculations from Bloomberg.

The same calculations imply that a move will have already taken place by October, while federal funds futures signal a 28 per cent likelihood that the central bank will have lifted rates twice by December (up from 21 per cent on Monday).

Odds Over Time

Note that 80% odds in February are still under 50% today, according to Bloomberg’s calculation.

Over 50% Says St. Louis Fed Chief James Bullard

On July 21, USA Today reported Odds of Fed Rate Hike in September are Rising. 

 St. Louis Fed chief James Bullard told FOXBusiness news on Monday there’s “more than a 50% probability right now.” that Fed policymakers will boost the central bank’s benchmark rate at a September 16-17 meeting.

And 82% of 70 economists surveyed by the Wall Street Journal said last week they expect the Fed to act in September. It would be its first rate increase in nearly a decade.

Yapping Away

This Fed-Yap has a clear purpose: To get the market to expect, even front-run a hike.

After all, the Fed does not want to surprise the market in any way shape or form. 

CME FedWatch Says September Hike 0% Likely

In contrast to the 48% chance noted by Bloomberg, CME’s Fed Watch Probability says there’s a 0% chance of a hike.

click on link to refresh

CME vs. Bloomberg

A moment ago the CME stated there was a 2% change. It’s now back to 0%. Yesterday it was 12%.

What’s going on? I suspect the answer can be found in the following bullet points on the CME site.