Will the Fed cut interest rates again at its December 11 FOMC meeting next week? There’s plenty of chatter suggesting the answer will be “yes” and Fed funds futures are in agreement.
The January ’08 contract is priced, as we write this morning, for Fed funds at just under 4.14%, which is to say about 36 basis points below the current 4.50%. To extrapolate the message further: a 25-basis-point cut is likely, but there’s debate about whether a 50-basis-point slash is possible.
Nonetheless, bond guru Bill Gross of Pimco predicts the central bank will have to go much lower. “To restart a near recessionary economy we may need to eventually go down to 3% or lower,” he wrote in his latest missive that was published yesterday.