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FED Rate Forecast

Today the PPI (Producer Price Index) not including food and energy came in negative.   The CPI (Consumer Price Index) is the next one to look at.

Irregardless inflation expectations have risen quite a bit as can be seen clearly in the bond markets with the 10-year yield at 2.214.  The Trump election with the associated expectations on infrastructure projects has raised inflation expectations quickly with 2.5 to 3% estimates within a next couple of years or sooner.

What this means is that the FED will certainly raise in December as we have projected for quite a while.  In fact the FED futures have increased the probability to 81% now.

The real question is what comes afterwards. We estimate the rate rises will happen quicker and more frequently than the market expects.