Eurozone Recession Risks Rise as Middle East Conflict Threatens Growth, ECB Official Warns 
ECB Rate Outlook: Ceasefire Eases Pressure but Hikes Still Expected in 2026 
BOJ Rate Hike Expectations Grow as Board Member Signals Hawkish Stance 
RBA Raises Interest Rates to 4.35% Amid Rising Inflation Risks and Middle East Tensions 
South Korea Central Bank Signals Cautious Policy Amid Inflation and Middle East Tensions 
Japan Inflation Expectations Rise as BOJ Rate Hike Timing Faces Uncertainty 
South Korea Central Bank Signals Inflation Concerns as Oil Prices Surge 
FOMC increased interest rates in March and maintained its forecast for three rate hikes in 2018. FOMC also forecasted a faster pace of hikes next year than previously forecasted. March decision was unanimous. Current Federal funds rate - 150-175 bps (Note, all calculations are based on data as of 11th June)
- June 2018 meeting: Market is attaching 8.7 percent probability that rates will be at 1.50-1.75 percent, and 91.3 percent probability that rates will be at 1.75-2.00 percent.
- August 2018 meeting: Market is attaching 8.6 percent probability that rates will be at 1.50-1.75 percent, 89.6 percent probability that rates will be at 1.75-2.00 percent, and 1.8 percent probability that rates will be at 2.00-2.25 percent.
- September 2018 meeting: Market is attaching 2.3 percent probability that rates will be at 1.50-1.75 percent, 30.3 percent probability that rates will be at 1.75-2.00 percent, 66.1 percent probability that rates will be at 2.00-2.25 percent, and 1.3 percent probability that rates will be at 2.25-2.50 percent.
- November 2018 meeting: Market is attaching 2.1 percent probability that rates will be at 1.50-1.75 percent, 27.5 percent probability that rates will be at 1.75-2.00 percent, 64.7 percent probability that rates will be at 2.00-2.25 percent, 5.6 percent probability that rates will be at 2.25-2.50 percent, and 0.1 percent probability that rates will be at 2.50-2.75 percent.
- December 2018 meeting: Market is attaching 0.9 percent probability that rates will be at 1.50-1.75 percent, 13.5 percent probability that rates will be at 1.75-2.00 percent, 44.2 percent probability that rates will be at 2.00-2.25 percent, 38.2 percent probability that rates will be at 2.25-2.50 percent, and 3.2 percent probability that rates will be at 2.50-2.75 percent.
- January 2019 meeting: Market is attaching 0.8 percent probability that rates will be at 1.50-1.75 percent, 12.4 percent probability that rates will be at 1.75-2.00 percent, 41.6 percent probability that rates will be at 2.00-2.25 percent, 38.7 percent probability that rates will be at 2.25-2.50 percent, and 6.1 percent probability that rates will be at 2.50-2.75 percent, and 0.3 percent probability that rates will be at 2.75-3.00 percent.
The probability is suggesting,
- Since our last review a week ago, the probability has not changed much.
- Next hike is priced in June with 91.3 percent probability, same as a week ago.
- The market brought forwarded the third hike for 2018 in September and pricing it with 67.4 percent probability compared to 68.5 percent a week ago.
- The market is pricing the fourth hike in December with 41.4 percent probability instead of 36.4 percent probability just a week ago.
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