Although I was largely on the sidelines, there was plenty to talk about on the trade front last week, including the news that our trade deficits continue to grow and China's surpluses continued to rise. That wasn't the only old news, however, as none of that made any impression on market expectations of where the federal funds rate is headed over the next couple of FOMC meetings. The pictures:
Tim Duy says "Monotonous", and William Polley is feeling a bit complacent. It appears they have lots of company.
If you are new here, the calculations in the pictures above are described here. If you are not new here, and are beginning to feel your Monday funds probabilities jones, relax. Here is the data:
Download implied_pdf_december_111105.xls
Download implied_pdf_january_111105.xls
Download Imp_pdf_slides_for_blog_111105.ppt
Note: If you are paying really, really close attention, you may recall that the implied probability for a 4.5% funds rate after the January meeting was over 90% when we last reported. The difference this week is that we added an option for an increase to 4.75%, which absorbed a little of the action on 4.5.