Discussion in 'Index Futures' started by nitro, Sep 20, 2005.

  1. nitro


    It's kind of funny how many people think the FED will pause here.

    IMO, there is a 99% probability of a FED .25 raise. While there may be a public relations conundrum for the FED since raising rates will appear cold in the face of Katrina, that can be handled in the accompanying statement. The measured pace language will continue.

    Look at world interest rates. Look at the Nikkei, look at DAX. Look at PGs numbers today. Look at US SIFs in the face of the biggest one day gain in crude yesterday. There is plenty of growth worldwide in a historically low interest rate environment. While there are signs that vulnerabilities are beginning to shape, those vulnerabilities don't appear to be of worry until well into '06.

    In short, .25 raise immanent, with the language almost identical to what is usual, with the exception that for PR reasons the FED will throw in a compassionate section dedicated to Katrina victims. More interesting is how the long end of the YC will react...

    Markets will rise into the FED hike, then I have no idea what will happen after the announcement.

  2. They have to raise.
    Otherwise things can get out of control in no time.
  3. I agree but Bill Gross said yesterday there is a possibilty of a pause today.

    IMF just said "gradual fed tightening policy is appropriate"

    Could be some good moves if they do pause

    As of friday's close the Fed Funds option market points to a 62% chance of 4% after Nov 1st meeting and show a 92% chance of a hike today as of now.

    It is believed the fed statement will highlight the "uncertainty" of economic data. Closely watched lines will be the "the stance of monetary policy remains accommodative" and "the policy accommodation can be removed at a pace that is likely to be measured."

    Productivity and its unusual strength seen in the last 10 yrs is directly linked to growth according to the fed so a pullback beyond what has already been seen may be justification to pause tightening. Productivity may become the new substitue for measured pace.
  4. Completely disagree with Mr. Gross.

    Again, marketing hype to try to make himself look like some kind of kingmaker. .... Making a big statement before a major announcement to make himself heard or to scare out positions is not my idea if a reliable channel of information.

    Of course it could end up by chance that he is right. My guess - based upon past behaviour and the market reaction through today is that there will be no change: that is same increase as before but perhaps a policy statement accomodation.

    Of course I could be completely wrong as well ...
  5. nitro


    Now Goldman Sachs reports huge numbers.

    Another nail in the coffin.

  6. They could hike and give an indication they might be closer to finished than the market is prepared for, or they could stand pat but warn that a break is only temporary due to unforseen events -- either way could turn the reaction to the actual decision on its head (but I'm sure more initial fireworks from the second case).
  7. 23 out of 111 analysts on the bloomberg survey are going for unchanged
  8. as of 19 Sept CBOT Fed Funds:
    8% for No Change vs 92% for +.25
  9. That could be a very real possibility.
    #10     Sep 20, 2005