Considering the market just hiked the 10yr by 65bps over the past two weeks, I’d say a 25bps hike in the Fed funds rate is a rather moot point now. The next question the market will need to answer is ‘when will they hike next?’
For the Fed, this is an ideal situation to be in. Although the economy blows, as evidenced by the upcoming holiday shopping season expected to be down 3.5% year over year, markets have somehow found themselves at record highs. Hiking rates into new highs is exactly what they’ve been desiring for the past year.
The Fed Funds futures are now indicating a 100% chance for a December hike. Moreover, futures are giving a 61% chance of another hike in June of 2017.
The Fed minutes came out a short while ago and were hawkish, as expected.
“Some participants noted that recent committee communications were consistent with an increase in the target range for the federal funds rate in the near term or argued that to preserve credibility, such an increase should occur at the next meeting,” the record of the Federal Open Market Committee meeting showed. Many officials said a rate rise could be appropriate “relatively soon,” data permitting, it said.
Markets seem to be entirely disinterested with anything fundamental related, gleefully gliding into national festival at record highs, rather enjoying the monstrous spike in sovereign borrowing rates that will impose itself in the form of a widening of the budget deficit and increase in the cost of any Trump proposed fiscal stimulus projects.
Next up: Black Friday.
Content originally generated at iBankCoin.
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