the jump in the unemployment rate and the expected economic drag from today's surge in energy costs have dampened expectations for future interest rate hikes from the fed. the bigger story is of course the change in expectations regarding what the ecb will do next, with the euribor market priced over the past two days for an extra 40 basis points of ecb rate hikes in 2008, expecting the ecb's base rate to be increased from 4% from 5%.
the federal funds futures market is priced for the fed to keep rates steady at both the 6/25 and 8/5 fomc meetings. for the 9/16 fomc meeting, the market is priced for the fed to possibly raise interest rates, with the odds of such put at about 20%, down from 24% yesterday. for the end of 2008, the market expects the funds rate to be boosted to 2.245% (currently 2%), down from 2.275% yesterday.