Speculation runs rampant: Will the Federal Reserve raise the federal funds rate or not next month? We remain in the “not” category, and to see how our opinion jibes with other opinions, we'll occasionally turn to CME Group's website (cmegroup.com). CME follows the federal funds futures market, where speculators bet on future interest rates, and CME's data show speculators are betting only a 24% chance for a rate increase next month.

That said, professional speculators can be a schizophrenic lot.  It's not unusual for CME to report wild weekly swings in the percentage speculators are giving the Fed.  Who knows? Next week these same speculators might price in a 50% chance.

The Fed may or may not raise the fed funds rate, which may or may not impact long-term lending rates.  The fed funds rate is a very short-term rate. It's the rate commercial banks lend to each other overnight. Given that most banks have an ample supply of excessive reserves held at the Fed, there isn't much demand for these loans.  The current fed funds rate is only 14 basis points.  In other words, a Fed rate hike wouldn't necessarily work its way to the long-end of the lending curve. 

Our instincts –  and this is all anyone can really go on – suggests that today's low rates will hold for a while longer.  Come early September, though, we wouldn't be surprised to see rates creep higher due to rising speculator anticipation. Therefore, now is as good a time as any to act.  We still think that the long-term impetus is for rates to rise.  

 Information provided by Jessica Regan.

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