When I last reported on the Carlson-Craig-Melick estimates of the federal funds rate path, expectations for the November meeting had softened substantially, but another 25 basis points at next week's FOMC meeting still looked like a lock.
What a difference a day made:
Here's the version of the picture with the relevant "news" identified:
Friday's relatively good employment report for August made some difference, and maybe better news from New Orleans will reinforce that move. But there is no escaping the conclusion that "no change" is now in play.
Unfortunately, the team that provides these estimates has advised me to hold off on reporting results for the November contract at this time. Because the market is now pricing in a positive probability of a pause, the estimation procedures are a bit more complicated, and the elves are not yet happy with what they see. They are working away on that, as well as the January contract, and I will report them as soon as I get the green light.
In the meantime, here's the data for the October contract pictured above:
Download implied_pdf_october_090205.xls
UPDATE: Mark Thoma collects some pundit commentary on how Katrina will affect the FOMC's decision, as does New Economist.
Barry Ritholtz objects to my characterization of the August employment report, in the comment section below. I responded, but if you want to decide for yourself Vox Baby provides the raw material.