While the most likely outcome is that the Fed keeps its fed funds rate at 0.25%, while buying bonds to effectively ease monetary policy, Goldman’s fed funds model implies that there is still a decent chance (1 in 4, 27%) that the Fed just cuts rates right to zero. There’s still one bullet left in this old gun… even as all eyes focus on the new quantitative easing cannon.
(Via Goldman Sachs, Fed Fund Probability Report, 29 October 2010)
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