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May 16, 2005
Fed Funds Probabilities: A Busy Week, But In The End Not Much Change
The options market on federal funds futures continues to tell us that another twenty-five basis points at the the June FOMC meeting is a really good bet. The October contract had an interesting week. The probability of pause somewhere over the August-September meetings took an inexplicable (to me) run early in the week, but then fell back on the strong trade and sales reports. When all was said and done, the end of last week looked a lot like the end of the week before.
Here's the pictures:
And here's the data:
Download july_pdfs_051605.xls
Download october_pdfs_051605.xls
May 16, 2005 in Fed Funds Futures, Federal Reserve and Monetary Policy | Permalink
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Listed below are links to blogs that reference Fed Funds Probabilities: A Busy Week, But In The End Not Much Change:
» Fed funds futures at macroblog--it must be Monday! from William J. Polley
Nothing really new or unexpected. The week ended as it began, but there was a bit of movement during the week in the predictions for October. David points out that the probability of a pause in the rate hikes took... [Read More]
Tracked on May 16, 2005 4:44:18 PM
Comments
Posted by:
Jack Krupansky |
May 16, 2005 at 03:46 PM
Jack --
John Carlson, Ben Craig, and Will Mellick address some of the forecasting questions in the paper I link to in the post. But you are right that, as we go out into the future, the reliability of these estimates become more suspect, not least because the markets are still pretty thin. So I offer them up assuming that you will supply your own grains of salt.
Posted by:
Dave Altig |
May 17, 2005 at 05:54 PM
Have there been any recent studies for the predictive power of fed funds futures? The last one I saw seemed to suggest that they were reasonably predictive for a month or maybe 45 days out, but I've seen nothing to suggest that we should think that they would be even remotely predictive 100 or 150 days out.
Without a robust definition of what a neutral stance would be relative to various levels of economic activity and inflation and inflation expectations, this is all a pie-in-the-sky crapshoot anyway.
And, what ever happened to the concept that monetary policy affects the economy with a significant lag?
-- Jack Krupansky