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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 18, 2005


The Word From Fed Funds Futures Options: More Measured Than Ever

As promised, here is the recap of the last week's implied probabilities for the federal funds rate over the next several months, as gleaned from the market for options on federal funds futures (compiled from the ever-steady hand of Erkin Sahinoz). 

The expectations for the May meeting didn't have far to go -- but they did the best they could.   The probability of a 25 basis point move at the next meeting started the week at 96%.  As of close of business on Friday, the figure was 98%.

May_4

Not surprisingly, the weak retail sales report left an impression, and the probability of a 50 basis point increase at the June meeting took a hit.

July_4

Note that the dip in the expectations for two 25 basis point increases over the next two meetings appears to have come from a resurrection of the sentiment that a pause after the May meeting now has a nonzero probability.

I was asked about the possibility of supplying the underlying data for these posts.  You demand, I supply.  They can be found in the underlying spreadsheets in this PowerPoint file:
Download Imp_pdf_slides_041505.ppt

UPDATE: I received several requests to provide the data for these pictures in Excel format.  Ok, here you go.

Download may_pdfs.xls

Download july_pdfs.xls

April 18, 2005 in Fed Funds Futures , Federal Reserve and Monetary Policy | Permalink

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Comments

The slight up-turn in the probabilty of a 3% FF rate in July is the story there.

Market sentiment took a very sharp turn away from inflation fears and a possible 50 bp hike on the horizon.

Posted by: michael | April 18, 2005 at 12:12 PM

would you supply research link with a description of the metodology employed?
Thanks in advance.

Posted by: Pablo | April 18, 2005 at 03:36 PM

I can't seem to access the data behind this chart when clicking on the download link. Any suggestions?

Posted by: mike | April 19, 2005 at 11:42 AM

mike --

You can get the data by going to the specific slide in edit mode, and clicking on the chart. However, to make things easy for you, I've uploaded the data in excel format.

Pablo --

I talked with John Carlson and Will Mellick about posting their working paper that explains their approach in more detail. They are revising the paper even as we speak, and should be done this week or next. I will post it as soon as it is available.

michael --

I agree with you.

Posted by: Dave Altig | April 19, 2005 at 04:18 PM

Do money market traders ever talk to professional economists ? They ought to.

Posted by: godement | April 19, 2005 at 05:55 PM

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