The Market’s New Rate Expectations

Nick Colas (Convergex) weighs in on what the market is now expecting from the FOMC, after yesterday’s non-hike:

The odds of a Fed rate hike by the end of the year are less than a coin toss – 45% to be exact.

The chance of a rate increase at the first meeting of the new year (January 27th) is 54%.

The current point estimate for Fed Funds at the end of June 2016 is 45 basis points, meaning markets expect the Fed to move just once between today and the middle of next year.

The current end of year Fed Funds Futures estimate for 2016 is 0.745%. That translates into 2 bumps to the Fed Funds rate of a quarter point each over the next 15 months. That’s it.

The market went into yesterday pricing in a 30% or so chance of a hike (or less than a coin toss) and was vindicated in this view. Market expectations have been a much better indicator than anything coming out of the mouths of human economists, in the aggregate, and are much more worthy of our attention.

Source:

Your Ego is Writing Checks Your Body Can’t Cash
Comvergex – September 17th 2015