by Calculated Risk on 4/13/2006 10:47:00 PM

Dr. Tim Duy presents another Fed Watch: Policy in Transition. Excerpt:

"... recent data reveals that the economy enjoys enough momentum to justify another rate hike in May. That is something of a given at this point; the real question is the June meeting. I continue to feel that the Fed would like to take a pass at that meeting on the expectation of slowing economic growth, but make it clear that the odds of tightening beyond that remain about 50%. The question is whether the data will continue to support such a move, especially since policymakers would likely risk somewhat higher interest rates now to avoid even more aggressive hikes later. Particularly important is the relative impact of possible higher commodity prices versus expectations of slowing demand growth.

Another possible path comes to mind. As the play on housing becomes less stimulative, will market participants find yet another asset play to maintain household wealth? ..."

Interesting speculation! And just a reminder, every Monday, Dr. Dave Altig presents the market based probablities on Fed Funds rates.