ECB Eyes Rate Hike Amid Iran Conflict-Driven Energy Price Surge 
China Holds Benchmark Loan Prime Rate Steady for Tenth Consecutive Month 
BOJ Holds Interest Rates Steady Amid Middle East Uncertainty 
Global Central Banks Hold Rates Amid Iran War-Driven Energy Price Surge 
Bank of Japan Holds Rates Steady Amid Inflation Concerns and Yen Weakness 
Goldman Sachs Delays Bank of England Rate Cut Forecast Amid Middle East Inflation Risks 
Fed Holds Rates Steady as Middle East Conflict Clouds Inflation Outlook 
FOMC increased interest rates in March and June and increased its forecast from three rate hikes in 2018 to four rate hikes. June decision was unanimous. Current Federal funds rate - 175-200 bps (Note, all calculations are based on data as of 25th June)
- August 2018 meeting: Market is attaching 100 percent probability that rates will be at 1.75-2.00 percent.
- September 2018 meeting: Market is attaching 29.2 percent probability that rates will be at 1.75-2.00 percent, and 70.8 percent probability that rates will be at 2.00-2.25 percent.
- November 2018 meeting: Market is attaching 27.7 percent probability that rates will be at 1.75-2.00 percent, 68.6 percent probability that rates will be at 2.00-2.25 percent, and 3.7 percent probability that rates will be at 2.25-2.50 percent.
- December 2018 meeting: Market is attaching 11 percent probability that rates will be at 1.75-2.00 percent, 43.9 percent probability that rates will be at 2.00-2.25 percent, 42.8 percent probability that rates will be at 2.25-2.50 percent, and 2.2 percent probability that rates will be at 2.50-2.75 percent.
- January 2019 meeting: Market is attaching 10.1 percent probability that rates will be at 1.75-2.00 percent, 40.3 percent probability that rates will be at 2.00-2.25 percent, 42.4 percent probability that rates will be at 2.25-2.50 percent, and 7 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 probabilities have softened.
- The market is pricing the third hike for 2018 in September and pricing it with 70.8 percent probability compared to 83.3 percent a week ago.
- The market is pricing the fourth hike in December with 49.7 percent probability instead of 53.4 percent probability just a week ago.
- It is important to note that despite Fed’s forecast, the market is not ready to price in a fourth hike.
