Fed Credibility Collapses - Rate-Cut Now More Likely For Next Year

Just when you thought The Fed's credibility could not drop any further... it does. For the first time since the financial crisis, the market now sees a greater probability of a rate cut than a rate hike... for the next year.

As rate-hike odds collapse...

 

In fact, "bets" on an eventual dip into NIRP have surged to record highs, and we suspect even higher today...

 

[the chart shows the cumulative open interest in par calls on eurodollar futures contracts that expire in 2016 and 2017 - basically options on short-term interest rates with a strike price of zero, such that they pay out if the Fed takes rates negative]

It would appear that The Fed is going to need some new dots...