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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March 13, 2006

Funds Rate Probabilities: Locking In 5

The big move of the week in the Carlson-Craig-Melick estimates of market expectations for the federal funds rate path was not in the March meeting, where there wasn't much room to move in the first place...


... but in the May meeting, where another 25 basis points is now being priced in the options market as a dead cinch:


Sentiments in the direction of yet another move at the June meeting ran hot and cold over the week:


I'll declare that race wide open.

The usual data...
Download Imp_pdf_slides_for_blog_031006.ppt
Download implied_pdf_march_031006.xls
Download implied_pdf_may_031006.xls
Download implied_pdf_june_031006.xls

... and a new item on the menu, the pictures in flash format:
Download Imp_pdf_slides_for_blog_031006.swf

March 13, 2006 in Fed Funds Futures | Permalink


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Copied this commenter's response to a Mark Thoma post:
"In 1957, Amherst tuition was $1800. A working middle class family whose income was approximately $8,000, with help, could handle the cost.
Now fast forward to 2005. Tuition at Amherst College is $41,000. That $8,000 in 1957 becomes approximately $53,000 today, 2005. To put these numbers in perspective, college costs in 1957 were approximately 23% of that total income; today they are approximately 75% of an equivalent income." The horror of this is that in our post-manufacturing economy we'll be relying upon our ability to create intellectual capital.
I post this only to argue that Administration & Fed practices over the last 20 years have left Bernanke's Fed in an almost untenable position. I don't envy Ben, I have real doubts whether the people immediately around & under him are up to the task. But, I've got my fingers crossed & I'm comforted at least, that he's at the lead. And, yes, I think Lehman's closer to understanding the Fed dilemma than most.

Posted by: bailey | March 13, 2006 at 02:22 PM

Amherst tuition is $30,780 this year. http://www.amherst.edu/~finaid/firstyear/faq.html . Only if you include room and board does it approach $41,000. Half the student body received scholarship assistance averaging $26,326.

According to http://www.census.gov/hhes/www/income/histinc/f01ar.html a 1957 income of $8,000 would put them just above the 4th quintile. Today a comparable family would make over $100,000, based on that same table.

Between the greater wealth of the population and the financial assistance available today, Amherst and other private colleges are still a very popular and affordable choice. In fact most such colleges are turning away far more students today than in the 1950s. College education rates have greatly increased, reflecting increased demand for a high quality college education. The demand has driven up the relative price - new good colleges can't be created overnight - but college is still affordable.

Posted by: Hal | March 13, 2006 at 03:09 PM

Hal, thanks. So much for accepting others' numbers. Is my point worth restating if college costs have increased from 22% to 31% of income? I think so, but maybe from a different perspective. I grabbed "Stormy's" comment because I'm a real elitist when it comes to forwarding educational opportunity. I believe our only chance to compete globally will depend upon our ability to support the education of EVERY child from a very early age to his full academic potential. That's certainly NOT a job for the Fed, but I think it speaks volumes, albeit by way of Brooklyn, to our need for an independent Fed willing to speak loudly & often against reprehensibly profligate fiscal policies forwarded by short-sighted politics of the day. I'll be more careful in the future.

Posted by: bailey | March 13, 2006 at 07:29 PM

Bailey, your comments make a lot of sense, although as you pointed out, I'm not quite sure how involved the Fed can be with regards to education in general. Nevertheless, the truth is that a realignment of budgetary priorities is necessary in order to maintain growth and standard of living in the "post manufacturing" economy. This realignment might be a tall order though...

Posted by: Mike D | March 15, 2006 at 09:04 AM

Mike D. I agree realignment will be VERY tough. Power readily acceded is tough to regain. But, an independent Fed that recognizes its role as honest broker is ABSOLUTELY CRUCIAL if we're ever to return to the "Culte de la Raisonage".

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