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Fed Hike Aftermath Series: Market very dovish heading into FOMC announcement

The financial market pricing very dovish announcements from the U.S. Federal Reserve at today’s meeting. If the Fed turns out to be far more hawkish than the market, there could be a sharp repricing across all asset class.

  • The market is pricing just 66 percent chance of a rate hike at today’s meeting, which is pretty dovish considering the state of the U.S. economy, where GDP growing at 3 percent y/y in the last quarter and core inflation rate at 2.2 percent.
  • Which is even more dovish is that the market is pricing just one rate hike in 2019 and that with just 39 percent probability, which is also very dovish considering that fact that FOMC projected three rate hikes in 2019 at its September 2018 meeting.

We expect the FOMC to follow through its forecast and hike rates by 25 basis points today, and reduce its 2019 rate forecasts from three to two hikes. The announcement after today’s meeting is expected at 19:00 GMT.

  • Market Data
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