As promised, here is the recap of the last week's implied probabilities for the federal funds rate over the next several months, as gleaned from the market for options on federal funds futures (compiled from the ever-steady hand of Erkin Sahinoz).
The expectations for the May meeting didn't have far to go -- but they did the best they could. The probability of a 25 basis point move at the next meeting started the week at 96%. As of close of business on Friday, the figure was 98%.
Not surprisingly, the weak retail sales report left an impression, and the probability of a 50 basis point increase at the June meeting took a hit.
Note that the dip in the expectations for two 25 basis point increases over the next two meetings appears to have come from a resurrection of the sentiment that a pause after the May meeting now has a nonzero probability.
I was asked about the possibility of supplying the underlying data for these posts. You demand, I supply. They can be found in the underlying spreadsheets in this PowerPoint file:
Download Imp_pdf_slides_041505.ppt
UPDATE: I received several requests to provide the data for these pictures in Excel format. Ok, here you go.