Friday, September 12, 2008

Will the Fed cut rates next week?

Currency strategists at point out an interesting fact. Fed funds futures are now beginning to price in a slight chance of a rate cut as early as next week when the Fed meets and decides on interest rates. Futures are seeing a 14% chance of a 25 basis point rate cut up from 0% a week ago (see chart below). This constitutes a complete turn-around of expectations since a rate increase was priced into the fed funds futures market at the end of July. The Federal Reserve had declared inflation a concern and is therefore expected to keep interest rates unchanged for some time. In light of challenging developments in the financial services industry these expectations seemed to be revisited.
click to enlarge

source: US Dollar Down Over 2% vs British Pound as Markets Price In Fed Rate Cut Next Week
Written by Terri Belkas, Currency Strategist, Friday, 12 September 2008 19:22:02 GMT

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