Fed Funds futures continue to point toward a coming rate hike but give it only a 24% chance of happening at the September FOMC meeting.

The full profile of implied probabilities of a Fed rate hike derived from CME Fed Funds futures are detailed in the chart below. Fed Funds futures suggest a two-thirds probability that rates increase by the January meeting early next year.

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While we fully expect a rate hike between now and early 2016, weakness in China and U.S. stock market volatility may have delayed the first rate increase to October or later.

Nevertheless, we still expect the Fed to take its first step toward normalizing interest rates very soon despite little evidence of traditional economic ‘pressures’ in the economy.