“The market is expecting an interest-rate hike in December, and there is no fundamental reason for the Fed” to disappoint according to DZ Bank's Birgit Figge, and judging by the spike in futures-market-implied rate-hike odds post-Trump, it's a done deal.
As Bloomberg reports, the odds of a Fed move by December have risen from 68 percent at the start of November as inflation expectations surged to near 100%...
However, we are not quite sure what The Fed is seeing (apart from its 'managed' employment data) to justify this much jawboning and conviction...
Beyond December, swaps trading shows the expectation for a faster tightening cycle. Overnight index swap contracts implied the central bank’s benchmark rate will be 1.25 percent in two years’ time, compared with an expected 0.83 percent on Nov. 7, the day before the U.S. election. That means the market is pricing in another hike as Trump’s win and a Republican-controlled Congress portend a wave of spending to bolster the U.S. economy.
St. Louis Fed President James Bullard said there’s a chance the U.S. economy could get a medium-term boost if Trump increases infrastructure spending and tax reforms, though it’s too soon to say how the economy may be affected by the election.
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So bottom line - 2017 is gonna be awesome, just you wait and see!!