Here is John Cochrane, The Grumpy Economist, commenting on Torsten Slok’s graph:
“Torsten Slok at DB updates this lovely graph on occasion. Here’s what it means. Fed fund futures are essentially bets on where the Federal funds rate will be at various points in the future. Thus, you can read from the dashed lines the market’s guess about where the federal funds rate will go — assuming that the bets are priced to have an even chance of winning or losing.
Reading it that way, the market was systematically wrong from 2009 to 2016. It’s something like springtime in Chicago — this week, 40 degrees and raining. Next week, 75 and sunny. Week after week after week. In 2017, the market finally changed expectations to say, no, fed funds rates are not rising — just in time to miss the actual rise in federal funds. Now, as in the blue line, market forecasts say there will be a big decline. But, as Torsten points out, why would the market be right today?”