More Fed cuts are on the way, judging by Fed funds futures.

Fed funds futures price in an 88% chance that the feds will cut rates by another half point in April to 1.75%.

Based on futures trading in Chicago, investor bets had implied a 100% chance of a cut of one percentage point prior to yesterday’s move by Bernanke & Co.

“The Fed is going to run out of bullets soon,” says Dan Denning.

“The current collateral-laundering policy is clearly inflationary. While not directly increasing the liabilities of the US government (yet) the Fed only has about $700 billion in Treasury’s it can lend out for 28-days at a time (or longer, if it sees fit.)

“The promise to lend up to US$200 billion as of March 27 eats into this US$700 billion. And that leads us to what comes next.”