Now things are starting to get a little more interesting.  To nobody's surprise, the probability of a 25 basis point increase at the next Federal Open Market Committee meeting on June 29 and 30 continued its inexorable march toward 100 percent.  (As always, these probabilities are estimated from prices on options for federal funds futures.)

There was considerably more action in the October contracts (spanning meetings in June, August, and September).  The probability attached to the "measured pace" scenario -- a cumulative 75 basis point increase over the period -- fell dramatically, from over 55% at the beginning of last week to just under 18% by the close of trading on Friday.  The probability on every other option considered -- no change after the presumed 25 basis points at the June meeting, an additional 25 basis point and then a pause, and even a more-aggressive-than-measured increase of 100 basis points through to October -- gained.  Nonetheless, the weight decidedly shifted to some sort of break in the pace of funds rate increases.

Here are the pictures:

July_12

October_6

Here are the pictures in Power Point format, if you'd like:
Download Imp_pdf_slides_for_blog_061005.ppt

And the data in Excel spreadsheets:
Download july_pdfs_061305.xls
Download october_pdfs_061305.xls

And if you are new here, this link will take you to a website that explains what this is all about.

(Thanks Pat -- welcome back Erkin.)