The quotes …
As of 7:17 am EST
Fed Funds options: 95.175. Projected effective fed funds rate: 4.825
Fed Funds futures: 95.12. Projected effective fed funds rate: 4.88
Bitcoin options: USD 30185
Bitcoin futures: USD 30185
Source: CME Group
BTC/USD: USD 30104 (bid). USD 301543 (ask) spread .002%
Interest on Reserve Balances: 4.90%
Effective Fed Funds Rate: 4.83%
One-month Treasury: 4.27%
Two-month Treasury: 4.89%
Two-year Treasury: 4.03%
Ten-year Treasury: 3.43%
Source: U.S. Department of the Treasury
The takeaway …
The U.S. Bureau of Labor Statistics today reported that consumer prices rose 0.1% in the month of March 2023. Year over year consumer prices rose 5.0%. This reflects a slowdown in the rate of increase in consumer prices. I expect that the Board of Governors of the Federal Reserve System will take into consideration the reduction in the rate of increase when deciding in May whether to increase the target range for the federal funds overnight rate.
The markets will not make a definitive guess on whether or not there will be a rate increase announced on 3 May 2023 until the U.S. Bureau of Economic Analysis releases the personal consumption expenditures index on 28 April 2023.
The Board of Governors preferred gauge of inflation is the PCE index.
At the time of this writing, Mr Biden is in Belfast delivering remarks at the 25th anniversary of the Belfast/Good Friday Agreement.
Should Mr Biden speak specifically to the inflation report, I expect that he will give some amount of credit to his inflation reduction and infrastructure initiatives that he has been implementing over the past two years. In theory, fiscal spending usually takes 18 months to move through the economy. Inflation, however, is a monetary phenomenon where there is an increase in money supply and not enough production in the economy to absorb the money supply.
By this definition, all eyes should remain on the Federal Reserve.
12 April 2023
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