by Matthew Kerkhoff
Financial Sense
Looking at Fed Fund futures prices, it’s evident that the market is pricing in a rate hike for December. You can see this in the chart below, which shows nearly 70% of market participants expecting the Fed Funds rate to be 25 – 50 basis points higher following that meeting.
[…] But a rate hike is not necessarily a done deal, as a number of factors are working against the Fed’s dual mandate of 2% inflation and maximum employment.
To start with, the Fed uses a theory known as the Phillips curve to describe the relationship between these two aspects of our economy. This theory proposes that falling unemployment pushes up prices and wages, which then requires tighter credit to keep inflation in check.