US reports August housing starts and permits today - BBH

Research Team at BBH, suggests that the US reports August housing starts and permits today and after the July housing starts represented a new post-crisis high, a small pullback is expected in August. 

Key Quotes

“On the other hand, permits, which are including among the leading economic indicators, slipped in July and are expected to bounce back in August.  Barring a dramatic surprise, the time series is not typically a market-mover.  This is especially true today ahead of the conclusion of the FOMC meeting tomorrow. 

The September Fed funds contract continues to imply an average effective Fed funds rate of 40.75 bp this month.  It has averaged 40 bp until now.  However, on the last trading day of the month, the Fed funds effective rate has consistently fallen to 30 bp.  If this pattern continues, then Fed funds will average 39.66 bp this month.  Our calculation puts us closer to the CME assessment of 12% chance of a hike rather than the Bloomberg estimate of 20%.  That said, we are intrigued by the press reports suggesting that for the first time in this cycle, there is a disagreement among primary dealers, with two holding out the likelihood of a hike.”