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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: John Pitera who wrote (7529)	1/18/2007 10:18:44 PM
From: John Pitera	Read Replies (1) \| Respond to of 33421

US RATE FUTURES-Prospects for '07 Fed cuts sinking Thursday, January 18, 2007 8:07:24 AM (GMT-06:00) Provided by: Reuters News (Adds details) SCOTTSDALE, Arizona, Jan 18 (Reuters) - U.S. short-term interest rate futures fell on Thursday, slashing the implied chances for Federal Reserve rate cuts in 2007 on fresh evidence the economy could be stronger than expected. Futures briefly showed a slim, 2 percent chance that the Fed will raise rates by its March meeting <FFJ7> but for the most part are fully priced for the Fed to hold rates steady through the first quarter. Big losses in deferred months cut chances for rate cuts for the rest of the year, extending the market's recent trend. Futures no longer fully price a single quarter-point rate cut for 2007 <EDZ7>. "You're seeing broad signs that the U.S. economy is looking more stable. I think the market can now more safely erase expectations for Fed rate cuts," said Lara Rhame, senior currency strategist at Credit Suisse in New York. The continuation of a recent major shift in ideas on rates came as the U.S. Labor Department's Thursday report on December consumer inflation was in line with expectations but reports on housing starts and weekly jobless claims were stronger than expected. "It reduces then chance of any Fed cuts in the near future and increases the chances of a tightening move, albeit much later this year," said Cary Leahey, economist at Decision Economics in New York. Core consumer prices, stripped of food and energy, rose by 0.2 percent, keeping the year-on-year advance at 2.6 percent, the same as November. At the same time, the Labor Department said Thursday that December housing starts unexpectedly rose by 4.5 percent, and weekly jobless claims also fell, keeping the focus on a tight labor market and potential wage inflation.