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FED Hike Aftermath Series: Hike probabilities review

As Dollar has been weakening steadily since Janet Yellen assured that monetary policy accommodation to be removed only gradually, Market has been a lot more dovish in its projection of FOMC rate. While March FED projections indicated two rate hikes this year, market has been pricing just one.

With another FED meeting approaching next week, let’s review the hike probabilities over next few meetings –

Current FED funds rate stands at 0.25-0.5%

  • April, 2016 meeting – Market is attaching 97% probability that rates will remain at 0.25-0.5% and 3% probability that there would be 25 basis points hike.
     
  • June, 2016 meeting – Market is attaching 75% probability that rates will remain at 0.25-0.5%, 24% probability that rates will be at 0.5-0.75% and 1% probability that rates will be at 0.75-1%.
     
  • July, 2016 meeting - Market is attaching 59% probability that rates will remain at 0.25-0.5%, 35% probability that rates will be at 0.5-0.75% and 6% probability that rates will be at 0.75-1%

                                                              

  • September, 2016 meeting - Market is attaching 46% probability that rates will remain at 0.25-0.5%, 40% probability that rates will be at 0.5-0.75%, 12% probability that the rates will be at 0.75-1% and only 1% probability that the rates will be at 1-1.25%.

 

  • November, 2016 meeting - Market is pricing 44% probability that rates will remain at 0.25-0.5%, 41% probability that rates will be at 0.5-0.75%, 14% probability that the rates will be at 0.75-1% and only 2% probability that the rates will be at 1-1.25%.

Dollar only in recent trading has been showing some strength, so we wonder will the probabilities be shifting towards more hawkish.

Dollar index is currently trading at 94.5

  • Market Data
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