Additional Fed Cut Expectations Discounted by September Jobs Growth. Payroll employment grew by 110,000 in September and was revised upwards to 89,000 in August (from a decline of 4,000). This news reduces the liklihood of additional short-term interest rate cuts by the Federal Reserve. The Chicago Board of Trade's 30-Day Federal Funds Futures contracts show that traders still expect the Federal funds target rate to drop another 1/4-point cut by year-end (to 4.5%). But the odds of a cut at the Fed's Oct. 31 meeting have fallen below 50% (44%), and the odds of additional cuts have also fallen. (To calculate percentage odds, take 100 minus the CBOT Close price for a date, subtract this number from the current funds target, 4.75%, and divide the result by 0.25.) Money fund yields continue inching downwards in reaction to the Fed's recent 1/2-point cut, but the decline has been diluted by stubbornly high ABCP and LIBOR rates. Crane Data's outlook is that the economy will stengthen further and that additional Fed cuts are unlikely in 2007.

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