The combination of the stronger than expected US employment report and two Fed officials in the past 24 hours (Hoenig and Lockhart) talking about not waiting too long to hike rates has seen the Fed funds futures sell-off sharply. The Dec futures contract is now implying an effective Fed funds rate of 47 bp. The Sept contract is implying a 28 bp effective average. There are hawks at the Fed and they have had been beaten into submission by the crisis. The market is probably getting ahead of itself in terms of tightening and reducing the fiscal stimulus. The only thing that has happened is that the pace of decline has slowed. What green shoots there are, are terribly fragile.
Sharp Backing Up In Fed Fund Expectations
![Sharp Backing Up In Fed Fund Expectations]()
Reviewed by magonomics
on
June 05, 2009
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