The Dean of Fedwatchers is still at it
Steve Beckner, formerly of MNI, has been watching the Fed for many years and that's helped to give him a clear-eyed vision of what's coming next.
He's out with his preview of the Sept 20 FOMC and the general theme is that markets shouldn't be ruling out a December hike.
"The FOMC would shock the world if it were to raise the funds rate this time, but it's too soon to preclude a December rate hike, which would take the funds rate to a target range of 1.25% to 1.5%," Beckner writes. "While subpar inflation might militate against a third hike, there are other reasons to think the FOMC might move in December, most notably the accelerated pace at which the economy has been growing and creating jobs in a climate of accommodative financial conditions."
On the balance sheet, he said the Fed is "almost sure" to announce a taper that will probably begin in early October.
The main question, though, is on interest rates and Beckner seems to think a December move is more-likely than the 45% chance the market is pricing in.
"Delaying further rate normalization beyond December would go against everything the Fed leadership has been saying all year," he writes.
