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Grim Budget Outlook Forces Treasury ...   Gambling Strategies: Always Bet on W...
Apr 30 2008 3:39PM EDT

Unanswered Questions: To Pause or Not to Pause?

Most Fed watchers were expecting the FOMC to signal in its post-meeting statement that rates would remain steady after today's cut. That view was boosted when this short phrase on growth prospects in the March statement went missing:

"However, downside risks to growth remain."

Bloomberg and WSJ interpreted the actions as a signal from the Fed that it was pausing. The FT and NYT, on the other hand, went looking for even firmer wording from Bernanke and crew that the current Fed cycle was over, but didn't find any.

Which is closer to truth?

Prior to today's announcement, interest rate futures had priced in a zero percent probability that the Fed would cut rates at its next meeting in June. Afterwards, rate futures signaled about a 20 percent chance of a rate cut.

If the Fed was looking to send a clear signal today, it fell quite short.

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