78% chance of Fed hike at Dec meeting - CME Group's FedWatch


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Following comments from both Yellen and Fed's Bostic, Federal Funds Futures imply traders see a 78% chance of a Fed hike at Dec meeting according to CME Group's FedWatch

Yellen's comments:

  • Gradual approach to hikes particularly appropriate in light of subdued inflation, low neutral rate
  • Imprudent to leave rates on hold until inflation reaches 2%
  • Can still achieve 2% target goal even if fed is underestimating slack or overestimating inflation expectations
  • Low inflation likely due to transitory factors, sees many uncertainties
  • Downward pressure on inflation could prove unexpectedly persistent
  • Considerable' odds that inflation won't stabilize at 2% over next few years
  • Risk that inflation expectations are not as well-anchored as they appear
  • Data suggests labour mkt is healthy, without substantial slack & not overheated
  • Evidence on labour mkt not definitive, says Fed must be 'open-minded'

Bostic's:

  • Even after hurricanes, above 2% GDP expectation is reasonable
  • Pace of job creation in the US remains strong
  • Not overly concerned about asset price bubbles
  • Want "clear evidence" inflation is rising to Fed's 2 percent target
  • Attributes recent low inflation to remaining weakness in labor market, sign recovery is continuing
  • Weak wages also a sign that slack remains in the labor market
  • Do not regard monetary policy as "too loose" for current economic conditions or that it is feeding asset bubbles
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