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Fed Hike Aftermath Series: Hike odds post March FOMC

As expected, the US Federal Reserve hiked interest rate by 25 basis points in its March meeting. However, aside from the rate hike, there were no major changes in the FOMC forecast or statement, except for few minor tweaks. With March meeting gone, there are now seven upcoming meetings this year and the Fed has forecasted hikes in two of them.  Let’s look at the market pricing of the hikes, (note, all calculations are based on data as of 16th March)

  • May 3rd meeting: Market is attaching 94 percent probability that rates will be at 0.75-1.00 percent, and 6 percent probability that rates will be at 1.00-1.25 percent.
  • June 14th Meeting: Market is attaching 46 percent probability that rates will be at 0.75-1.00 percent, 51 percent probability that rates will be at 1.00-1.25 percent, and 3 percent probability that rates will be at 1.25-1.50 percent.
  • July 26th meeting: Market is attaching 38 percent probability that rates will be at 0.75-1.00 percent, 50 percent probability that rates will be at 1.00-1.25 percent, 11 percent probability that rates will be at 1.25-1.50 percent, and 1 percent probability that rates will be at 1.50-1.75 percent.
  • September 20th meeting: Market is attaching 21 percent probability that rates will be at 0.75-1.00 percent, 45 percent probability that rates will be at 1.00-1.25 percent, 28 percent probability that rates will be at 1.25-1.50 percent, 5.5 percent probability that rates will be at 1.50-1.75 percent, and 0.5 percent probability that rates will be at 1.75-2.00 percent.
  • November 1st meeting:  Market is attaching 20 percent probability that rates will be at 0.75-1.00 percent, 43 percent probability that rates will be at 1.00-1.25 percent, 29 percent probability that rates will be at 1.25-1.50 percent, 7 percent probability that rates will be at 1.50-1.75 percent, and 1 percent probability that rates will be at 1.75-2.00 percent.
  • December 13th meeting: Market is attaching 10 percent probability that rates will be at 0.75-1.00 percent, 32 percent probability that rates will be at 1.00-1.25 percent, 36 percent probability that rates will be at 1.25-1.50 percent, 18 percent probability that rates will be at 1.50-1.75 percent, 3.5 percent probability that rates will be at 1.75-2.00 percent, and 0.5 percent probability that rates will be at 2.00-2.25 percent.

The probability is suggesting,

  • There hasn’t been much of a change after the FOMC. The market is still pricing a hike in June and a hike in December. It is still not clear why the market is predicting two hikes in H1 and just one in H2. This is probably because the market is pricing the Fed would keep additional room for easing.
  • We suspect that if the price of oil tumbles further, so would be the hike odds.
  • ET PRO
  • Market Data

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October 18 14:30 UTC Released

BRForeign Exchange Flows*

Actual

1.261 Bln USD

Forecast

Previous

0.980 Bln USD

October 18 13:00 UTC Released

RUReal Wages YY

Actual

2.6 %

Forecast

3.9 %

Previous

3.7 %

October 18 23:50 UTC 328328m

JPForeign Bond Investment

Actual

Forecast

Previous

89.2 Bln JPY

October 18 23:50 UTC 328328m

JPForeign Invest JP Stock

Actual

Forecast

Previous

1235.3 Bln JPY

October 18 23:50 UTC 328328m

JPExports YY*

Actual

Forecast

14.9 %

Previous

18.1 %

October 18 23:50 UTC 328328m

JPImports YY*

Actual

Forecast

15.0 %

Previous

15.2 %

October 18 23:50 UTC 328328m

JPTrade Balance Total Yen*

Actual

Forecast

559.8 Bln JPY

Previous

113.6 Bln JPY

October 19 00:00 UTC 338338m

KRBank of Korea Base Rate*

Actual

Forecast

Previous

1.25 %

October 19 00:00 UTC 338338m

ID7-Day Reverse Repo*

Actual

Forecast

4.25 %

Previous

4.25 %

October 19 00:00 UTC 338338m

IDDeposit Facility Rate*

Actual

Forecast

3.50 %

Previous

3.5 %

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