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Strategies & Market Trends : Stock Attack II - A Complete Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Compadre who wrote (51766)	6/3/2005 12:51:42 PM
From: Paul Shread	Read Replies (2) \| Respond to of 52237

US rate futures see more chance of Fed pause Fri Jun 3, 2005 09:21 AM ET CHICAGO, June 3 (Reuters) - U.S. short-term rate futures raced higher after Friday's weak monthly payrolls report to suggest the Federal Reserve will pause its program of interest rate increases as soon as the third quarter. After eight consecutive rate hikes by the central bank, the potential for "one and done" is looking a bit more likely ahead of the June 29-30 Federal Open Market Committee meeting. The Labor Department reported monthly U.S. jobs growth at 78,000, far below the median Wall Street forecast of 185,000 and the weakest result since August 2003. April payrolls growth was left unchanged but March was revised down by 24,000. "The dearth of jobs creation raises the possibility that the rate hike expected for the end of June to 3.25 percent might be the last one for the time being," said John Lonski, chief economist at Moody's Investors Service. Futures still fully price a 25 basis point increase in the federal funds rate at the Fed's June meeting, which would put the key rate at 3.25 percent. Futures prices show that the chances of another increase in August are about 73 percent, down from 79 percent on Thursday, Much bigger gains came in deferred Eurodollar futures, pulling the projected year-end fed funds rate (EDZ5: Quote, Profile, Research) as low as 3.50 percent. The implied rate is now 3.54 percent, down from 3.58 percent on Thursday, to suggest two to three more rate increases in 2005. "The Dallas Fed President who said we're getting into the 8th or 9th inning of rate hikes has it about right. In another 50 basis points or so the Fed will declare victory over aggressive growth," said Avery Shenfeld, senior economist at CIBC World Markets in Toronto. Others noted that with the unemployment rate down to 5.1 percent in May, the lowest since September 2001, and wage pressures headed up, the Fed might need to keep raising rates to stay ahead of inflation. "Alan Greenspan faces a dilemma; we think he keeps hiking," Ian Shepherdson, chief U.S. economist at High Frequency Economics, said in a research note. © Reuters 2005. All Rights Reserved.