The rate curve implied by the Fed Funds futures has steepened considerably over the past month. The market now anticipates the Fed beginning to raise the overnight rate in May of 2015. A month ago the expectation was for the end of 2015 - the implied rate hike has been pulled forward.
But the Fed can't start raising rates before the end of the unconventional monetary policy measures (can't be raising rates while buying securities at the same time). That means if the Fed begins to "taper" off bond buying in the next few months, it will have about one and a half years to go from $85 bn of securities purchases per month to zero.
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| Source: Barclays Capital |
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