Schenk predicted that subsequent increases of 25 basis points will be announced during the FOMC meetings in September, October and November, for a total Fed fund
rate increase of 1% by year-end 2015.
One, the Chicago IMM Eurodollar and Fed Fund
futures markets now contradicts the Fed Chairman's pledge because it implies a Fed Funds
rate of 0.
While still at historically low levels, the Fed Fund
rate increase marks a new cycle of rising borrowing costs across both consumer and commercial sectors.
Now that the Fed rate is dropped to historic lows, there is not much else the Fed can do by lowering the Fed fund
rate to affect the economy.
One way of measuring the market's expectations about changes in FOMC policy is to examine Eurodollar and fed fund
On the other hand, the massive sell-off in Treasuries also led fed fund
futures to shift to only price in a 28 percent chance of a 25bp cut by the Federal Reserve on October 29, compared to 82 percent on Thursday.
To the extent that the fed funds
future market embodies these expectations, the fed funds
futures rate may systematically overestimate the future fed funds
rates when fed fund
rates are falling and, by symmetry, underestimate the future fed funds
rate when fed funds
rates are rising.
The Fed Fund
's rate is the overnight rate of interest at which Fed Funds
are traded among financial institutions.
The dollar's strength may only be able to last so long, though, as fed fund
futures shifted today to price in a mild 10 percent chance of a 25bp rate cut on September 16.
He said, 'Given my current outlook, I believe that it would be appropriate to wait until 2017 to initiate lift off and then raise the fed funds
rate at about 2 percentage points per year.
Now with a self-sustaining expansion, the FOMC began rolling back its asset purchases program and, at some point in the future, it will start increasing its target for the fed funds
After today s decision by the Federal Reserve to maintain the target Fed funds
rate at zero to 25 basis points, Swiss Re s Chief Economist, Kurt Karl believes that with strong growth in the US economy virtually assured for the rest of the year, the Fed's forward guidance will at first become neutral and then begin hinting about a future tightening.