While we are not apt to make forecasts, we do appreciate looking at the implications of market prices.  The fed funds market is a great example of this.
The fine folks over at macroblog have updated their models that highlight the market’s expectations for the Fed funds rate. The futures market implies with over a 90% probability of a 25 bp rise at the January meeting, i.e. a 4.50% rate. The market also believes that another 25 bp rise is likely (60%) at the March meeting.

John M. Berry at Bloomberg.com believes the Fed’s Open Market Committee will not let the upcoming change in chairman effect their decision of their public statement. While the market believes otherwise there have been some hints by Fed officials that this might be the last hike for awhile. According to Berry the issue still seems to be up in the air.

So will the Fed stop at 4.5 percent, 4.75 percent or 5 percent or some other spot? No one, including the officials themselves, really knows at this point.

One thing to keep in mind: An FOMC statement that doesn’t clearly signal that another rate increase is likely doesn’t preclude just such a move at the next meeting. It will, as officials keep reminding us, depend on the data.

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