This chart from Merrill Lynch via Alphaville (which shows how the market has made repeated false starts on when the Fed will raise rates) sent me off to CME Fedwatch to see when markets expect the first rise in Fed Funds.
The answer is that fed fund futures give a 22% chance of a rate hike by August, 41% by September, 54% by November, and 67% by December. I can only disagree: given what I understand of the FOMC’s reaction function, I think these probabilities only fit a scenario in which a large part of the FOMC has got its inflation forecast wrong and, by the autumn, been forced to change it. Read more
Domestic inflation seems a much likelier explanation for the recent appreciation of the yuan than American pressure. Many commentators have referred to the Chinese “bowing to pressure” or otherwise implied that the authorities have – without apparent trigger – capitulated to Western pressure. A quick look at the timing suggests otherwise. China is in the middle of a tightening extravaganza, raising interest rates and reserve requirements to tackle inflation. A strengthening yuan can have exactly the same effect, by making imports cheaper. Timing is only circumstantial evidence, of course, but it is something. 
Chris Giles
Michael Steen
Robin Harding
Ralph Atkins
Claire Jones
