CME Fedwatch places a 99.6% possibility of a quarter point rate hike on June 14.
There is an additional possibility of 0.4% the Fed hikes by half a point.
Then what?
November Odds
December Odds
December is interesting because the odds of no additional hike this year topped 50% mid-day Friday. The odds settled at 45.5%. The market now expects a December hike.
The Fed managed to get in two hikes so far this year. I expected at most one. The third hike is now supposedly odds on.
Fed Hike Cycle Over?
I doubt the Fed hikes three times this year. In fact, I now think the Fed hike cycle ends in June. The next move, after June, will be a cut or a long delay.
However, if the Fed wants to hike, and can convince the market it will hike, then another hike is coming. Both requirements have to be met.
Economic data has been miserable. Judging from data alone, there is no reason for the Fed to hike (putting myself in their traditional talk-point shoes).
Yet, clearly, the Fed has blown economic bubbles. The Fed could have and should have hiked much more, much sooner.
Of course, that assumes there is a Fed, but there shouldn’t be.
I don’t know where rates should be, and neither do they. At least I know what I don’t know.
The Fed has now blown three massive bubbles in succession. This one will bust too. And instead of working with interest rates at 4.0% when the recession hits, the Fed will start with interest rates at or near 1.0%.
Second Quarter Reality
- Wholesale Trade Report Worse Than Expected: 2nd Quarter Recovery Thesis Nearly Dead
- Factory Orders a 2nd Quarter Disappointment: “High-Flying” Regional Nonsense
- Payrolls “Unexpectedly” Weak, Negative Revisions, Earning Poor: What Happened?
