This graphic charts how think the Federal Open Market Committee will change the Fed Funds Rate at its two-day meeting starting April 29.

Here's how to follow along:
Each colored line represents an "outcome" for the Fed Funds Rate post-meeting
The farther you go to the right, the closer you get to "today"
The farther you go to the top, the higher the probability of the result.

For example, if we single out the blue line until February 29 traders put the likelihood of a 1.500% Fed Funds Rate in April at 0 percent. By mid-March, that probability increased to 90 percent, and is now back to 0 percent again.

It's rare to see an outcome swing that hard over a 30-day period.

Today, the Fed Funds Rate is 2.250%. Therefore, the graphic tells us that traders expect the FOMC to drop the FFR 25 basis points to 2.000% later this month.

This is good news for consumer debtors because credit cards and home equity lines of credits are based on Prime Rate, a Fed Funds Rate derivative.
(Prime Rate) = (Fed Funds Rate) + (3.000 percent)

However, it's bad news for mortgage rate shoppers because additional cuts to the Fed Funds Rate could exacerbate the Fool in the Shower theory which says rapid Fed rate cutting over-stimlutes the economy into inflation just as it would be making its natural recovery.

Inflation is the enemy of mortgage bonds and that's why mortgage rates could suffer.

There's a lot of time between now and April 30's FOMC press release, though, and traders will continue to refine their predictions based on a combination of data, Fed speaker comments, and outside economic influences.

The next big one: This Thursday's Initial Jobless Claims report. More Americans filed for unemployment last week than during any week since Hurricane Katrina hit.

If the number remains up, expect FFR futures to fall (and mortgage rates to rise).