Morning Must-Read: Steve Goldstein: Markets Pricing in Kocherlakota-Like Interest Rates

…may be the biggest dove on the Federal Reserve, but his interest-rate projections would make him just an ordinary trader on Wall Street. The current Fed funds futures contract is pricing in interest rates of 2% at the end of the third quarter of 2017. The lowest “dot” on the Fed’s dot plot of interest rates is for rates of 2% at the end of 2017. And the next lowest dot is at 2.63%. It’s not known for certain that the 2% dot for 2017 comes from Kocherlakota, but his speeches are consistent with such a view. For example, unlike his colleagues, he doesn’t think any rate hike would be appropriate next year. He doesn’t expect inflation as measured by the PCE price index to get back to 2% until 2018. And he doesn’t want any reduction in accommodation unless the outlook is for inflation to be at 2% in two years time…