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Fed Hike Aftermath Series: Hike odds slip as treasuries gain

As expected, the US Federal Reserve hiked interest rate by 25 basis points in its March meeting. However, as the geopolitical tensions rise around the world and inflation readings came weaker than expected in March, the market is repricing the hikes for 2017 (note, all calculations are based on data as of 18th April)

  • May 3rd meeting: Market is attaching 95 percent probability that rates will be at 0.75-1.00 percent, and 5 percent probability that rates will be at 1.00-1.25 percent.
  • June 14th Meeting: Market is attaching 55 percent probability that rates will be at 0.75-1.00 percent, 42 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 49.8 percent probability that rates will be at 0.75-1.00 percent, 44 percent probability that rates will be at 1.00-1.25 percent, 6 percent probability that rates will be at 1.25-1.50 percent, and 0.2 percent probability that rates will be at 1.50-1.75 percent.
  • September 20th meeting: Market is attaching 36.3 percent probability that rates will be at 0.75-1.00 percent, 45.4 percent probability that rates will be at 1.00-1.25 percent, 16.4 percent probability that rates will be at 1.25-1.50 percent, 2 percent probability that rates will be at 1.50-1.75 percent, and 0.2 percent probability that rates will be at 1.75-2.00 percent.
  • November 1st meeting: Market is attaching 35 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, 17.6 percent probability that rates will be at 1.25-1.50 percent, 2 percent probability that rates will be at 1.50-1.75 percent, and 0.4 percent probability that rates will be at 1.75-2.00 percent.
  • December 13th meeting: Market is attaching 24 percent probability that rates will be at 0.75-1.00 percent, 42 percent probability that rates will be at 1.00-1.25 percent, 26 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.

The probability is suggesting,

  • The probability distribution has changed a lot over the past month and it is strongly suggesting that the market is taking a cautious approach towards the path of rate hikes from the US Federal Reserve. On an average, rate hike odds have been pushed back by a little more than 10 percent.
  • We suspect that if the price of oil tumbles further and the inflation readings continue to come weaker than expected then the rate hikes would slip further.
  • The market is now pricing just one more hike for 2017, instead of two more, just a month ago. The next hike pricing got pushed back from June to July.
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December 10 23:50 UTC Released

JPBusiness Survey Index*

Actual

9.7 %

Forecast

Previous

9.4 %

December 9 01:30 UTC Released

CNPPI YY*

Actual

5.8 %

Forecast

5.9 %

Previous

6.9 %

December 11 07:00 UTC 406406m

TRCurrent Account Balance*

Actual

Forecast

Previous

-4.527 Bln USD

December 11 09:00 UTC 526526m

ITRetail Sales SA MM

Actual

Forecast

Previous

0.9 %

December 11 09:00 UTC 526526m

ITRetail Sales NSA YY

Actual

Forecast

Previous

3.4 %

December 11 11:30 UTC 676676m

TREndYear CPI Fcst/Cb Svy*

Actual

Forecast

Previous

10.68 %

December 11 15:00 UTC 886886m

USEmployment Trends*

Actual

Forecast

Previous

135.6 tln

December 11 15:00 UTC 886886m

USJOLTS Job Openings*

Actual

Forecast

Previous

6.093 Mln

December 11 21:00 UTC 12461246m

KRExport Price Growth YY*

Actual

Forecast

Previous

8 %

December 11 21:00 UTC 12461246m

KRImport Price Growth YY*

Actual

Forecast

Previous

6.8 %

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