Fed: Market expectations has swung toward expecting a December rate hike - BBH

Research Team at BBH, suggests that the pendulum of market expectations has swung toward expecting a December Fed rate hike. 

Key Quotes

“There is some variance of estimates due to assumptions, but the Fed funds futures imply a roughly 2/3 chance.  Ironically, but importantly, the expectations have increased at the same time that Q3 GDP estimates have been cut.

The first estimate will be reported on October 28.  The median Bloomberg estimate is 2.5%.  The risk is on the downside.  The Atlanta Fed's GDPNow puts it at 2.0%, and the NY Fed's tracker says 2.2%.  The relevant comparison context here is not the average pace of growth in previous periods, but for the conduct of monetary.  For the conduct of monetary policy, current growth and trajectory need to be assessed relative to trend growth.  The Federal Reserve has been gradually cutting its estimate of trend growth.  It now stands at 1.8%.  Raising potential growth is not one of the masters that monetary policy can serve.”