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The Atlanta Fed's macroblog provides commentary and analysis on economic topics including monetary policy, macroeconomic developments, inflation, labor economics, and financial issues.

Authors for macroblog are Dave Altig, John Robertson, and other Atlanta Fed economists and researchers.


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April 25, 2005


This Week's Fed Funds Probabilities

The May contracts for options on federal funds futures prove that when a probability is at 98% it can't go much higher.

May_5

The July numbers are just a bit more interesting.  The CPI report last week took some of the steam out of the "no change in June" sentiment.  The probability of no change and the probability of 50 basis points are about the same now, and both are dark horses indeed.  The betting on another 25, though it slipped just a bit in favor of the more aggressive posture, is still above 70%.

July_5

For those who asked, here is the data that these charts are based on...

Download may_pdfs_043505.xls
Download july_pdfs_042505.xls

... and here is a paper by John Carlson, Ben Craig, and Will Mellick that takes a more in-depth look at the methodology and how it can be used:

Download FOMC20050210.pdf

April 25, 2005 in Fed Funds Futures , Federal Reserve and Monetary Policy | Permalink

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Listed below are links to blogs that reference This Week's Fed Funds Probabilities :

» Economic Cold Front coming in from Fester's Place
There is very little cushion within the economy, and that assumes no unusual shocks, so when the business cycle runs it course, the ability of either the Federal Reserve or the federal government to do pain alleviation or pump priming will have been ... [Read More]

Tracked on Apr 28, 2005 12:47:31 PM

Comments

There are reports coming out this week (existing home sales, consumer confidence, durable goods, GDP for 1st quarter) that will affect the perception of strength or weakness in the economy. I will be curious to see how the probabilities change, if they do, next Monday after these reports come out. I'm particularly interested in July where it looks like there are two small camps, one believeing rates will stay constant (the blue line moves upward at the end) and those believing in a 50 point increase (the uptick in the green line). It will be interesting to see which camp gets more devotees after this week's news.

Posted by: Mark Thoma | April 25, 2005 at 03:14 PM

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