Here’s the CME’s Fedwatch implied path for the Fed funds rate as of noon CT today:
Figure 1: Effective Fed funds (bold blue), 3 month Treasury yield (red), 10 year (green), 30 year (black), all constant maturity yields, in %. Dashed green line at US-Iran war start. Source: Treasury, Federal Reserve.
Here’s a detail:
Figure 2: Effective Fed funds (bold blue), 3 month Treasury yield (red), 10 year (green), 30 year (black), all constant maturity yields, in %. Dashed green line at US-Iran war start. Source: Treasury, Federal Reserve.
Modal prediction is for another 25 bps Fed funds increase by year’s end.
It doesn’t look like a 25 bps increase quieted inflation expectations completely, although the 5 year IC breakeven dropped 5 bps.
Off topic – Pete Hegseth has said there would be “No stupid rules of engagement” and bombed a school, killing hundreds of civilians, most of them children. The UN has now concluded that the bombing was a war crime:
https://www.bbc.com/news/articles/cm9w4n5nverdo
I don’t know what steps have to be taken for the ICC to issue a warrent for Hegseth’s arrest, but at some point he’ll have to limit his international travel. We should surrender him to the ICC once a warrent is issued – and once the president is not also a war criminal.
The UN war-crime finding was issued on September 14. Congressman Massie filed articles of impeachment against Hegseth on September 17, so could have known about the UN finding. Either way, Massie did cite the school bombing and the institutional changes Hegseth ordered which led to the bombing in Article IV of the Articles of Impeachment.
Massie also cited Hegseth’s orders to commit extra-judicial killings of alleged drug traffickers in Latin America in Article V. Happily, Massie included suppression of free speech in Article VIII.
Hegseth won’t be impeached prior to the election because the Speaker sent Congress home – can’t have dirty laundery aired ahead until the voting is done. Odds of impeachment will rise significantly next year, for Whiskey Pete and for the war-criminal-in-chief.
In related news, “If all interest rates were to rise 0.1 percentage points above projections, as they have already been trending in 2026, deficits would increase by $387 billion and interest costs would total $2.2 trillion by 2036.” Since federal debt has been increasingly concentrated in treasury notes and bills, could a .25% rate increase add close to $Trillion to the deficit and interest costs approach an additional $10 Trillion by 2036?
In other news, TIPS have been consistently outperforming ten year treasuries, because inflation has been higher than the market’s estimated breakeven inflation, which seems mostly stuck in a range of 2.0-2.5%. https://fred.stlouisfed.org/graph/fredgraph.png?g=1YACF&height=490