Fed fund futures see 40-60% chance of September liftoff
More than 80% of economists are forecasting a hike in September and Lockhart repeated his call for liftoff today. Why is the bond market not convinced?
The Sept Fed Funds contract is at 20 bps, which is well below the 0.37 bps midpoint between 0.25% and 0.50%, even factoring in the time premium.
But there's a danger in over-reliance on this as a gauge of what the Fed will announce. There's skepticism in the market about whether the Fed can actually deliver a hike and hold the Fed funds rate in its target range.
The Federal Reserve continues to test tools to control the effective Fed funds rate. A 14-day term deposit operation was conducted last week and another 7-day term deposit facility operation will take place on 13 August.
The Fed will primarily use IOER as their tool to control the effective Fed funds rate, setting it equal to the top of the target range for the Fed funds rate but there are still questions about whether it will work given huge cash reserves.
In her former career as a starter, Yellen was once held for questioning for homicide, officials said it was race related.
