Fed funds futures are firmer in response to the tame PPI report
Fed funds futures are firmer in response to the tame PPI report. While not a key report for the FOMC, it's message is one of still tame prices, which analysts suspect will be evident in other measures, including Friday's more crucial CPI report, and the key PCE chain prices on August 30. Despite the rally in futures, the implied September rate is still showing high probability of another 25 bp tightening at the September 25, 26 FOMC. The chances for a fourth hike at year-end are still holding around 65%. Analysts don't expect much negative impact from the trade spats, so still-solid economic growth will keep the Fed biased toward removing accommodation at the current quarterly pace. Analysts forecast action in September and December, consistent with the FOMC's dot plot.