FOMC - 26 Oct 2006

Reminder: FOMC Fed Day meeting on 26 Oct 2006. Expect quiet and then choppy market as usual. Further resources from previous Fed Days here:
http://www.mypivots.com/Education/articles/fed_days/

From CBOT's Fed watch, 98% probability of no change.

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CBOT Fed Watch - October 24 Market Close

In advance of this week's Federal Open Market Committee meeting on October 25, the Chicago Board of Trade will be reporting daily rate change probabilities in the FOMC's federal funds target rate, as indicated by the CBOT 30-Day Federal Funds futures contract. The CBOT 30-Day Federal Funds futures contract is a key benchmark interest rate barometer that reflects the forward overnight effective rate for excess reserves that are traded among commercial banks in the U.S. federal funds market.

Based upon the October 24 market close, the CBOT 30-Day Federal Funds futures contract for the November 2006 expiration is currently pricing in a 2 percent probability that the FOMC will decrease the target rate by at least 25 basis points from 5-1/4 percent to 5 percent at the FOMC meeting on October 25 (versus a 98 percent probability of no rate change).

This notification concludes this CBOT Fed Watch period. The next scheduled CBOT Fed Watch period will start on Tuesday, December 5, one full week prior to the next scheduled FOMC meeting on December 12.
Summary Table
October 18: 98% for No Change versus 2% for -25 bps.
October 19: 98% for No Change versus 2% for -25 bps.
October 20: 98% for No Change versus 2% for -25 bps.
October 23: 98% for No Change versus 2% for -25 bps.
October 24: 98% for No Change versus 2% for -25 bps.
October 25: FOMC decision on federal funds target rate.

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Release Date: October 25, 2006
For immediate release

The Federal Open Market Committee decided today to keep its target for the federal funds rate at 5-1/4 percent.

Economic growth has slowed over the course of the year, partly reflecting a cooling of the housing market. Going forward, the economy seems likely to expand at a moderate pace.

Readings on core inflation have been elevated, and the high level of resource utilization has the potential to sustain inflation pressures. However, inflation pressures seem likely to moderate over time, reflecting reduced impetus from energy prices, contained inflation expectations, and the cumulative effects of monetary policy actions and other factors restraining aggregate demand.

Nonetheless, the Committee judges that some inflation risks remain. The extent and timing of any additional firming that may be needed to address these risks will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Susan S. Bies; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; Sandra Pianalto; William Poole; Kevin M. Warsh; and Janet L. Yellen. Voting against was Jeffrey M. Lacker, who preferred an increase of 25 basis points in the federal funds rate target at this meeting.

This is what the E-mini S&P500 (ES) market looked like today. Tight until the announcement and then volatile afterwards. What is interesting about today is that the range in the ES was only 8.5 points which is lower than average and much lower than the average for a Fed Day.