The shelf life of expectations about where the funds rate is headed after the May 10 FOMC meeting is getting pretty short. Stan "the funds rate man" Jonas gives the heads-up on this, from John Berry:
Recent comments from Federal Reserve officials and the latest economic data continue to suggest that the cycle of rising short-term interest rates during most of the past two years will end next month.
And no sooner had I posted on last week's uptick in the market probability of 5.25% by June than I get a gander at these implied probabilities, from yesterday's close in the market for options on federal funds futures:
I guess now we'll wait and see which part of this headline sticks at the end of the day:
Headline producer prices up 0.5% on big jump in gasoline
UPDATE: And my ever-alert readers follow-up (below) on the incoming news of the day that seemingly aims in the same direction. Catching my eye, from the March FOMC minutes...
Several members were concerned that market participants might not fully appreciate the extent to which future policy action will depend on incoming economic data, especially when an end to the tightening process seems likely to be near. Some members expressed concern that retention of the phrase "some further policy firming may be needed to keep the risks...roughly in balance" could be misconstrued as suggesting that the Committee thought that several further tightening steps were likely to be necessary.
... and from President Yellen's speech (in addition to the passage picked-up by fred c. dobbs):
... I'm watching the data for confirmation of my forecast and for surprises that would make me alter my forecast. It's not really data dependence, but more accurately, data-surprise dependence.
In summary, I would not want to prejudge future decisions to raise rates—or to hold them steady—but rather I will be highly sensitive to the implications of incoming data for the forecast for economic growth, employment, and inflation.