BOJ Holds Interest Rates Steady, Upgrades Growth and Inflation Outlook for Japan 
U.S. Urges Japan on Monetary Policy as Yen Volatility Raises Market Concerns 
ECB’s Cipollone Backs Digital Euro as Europe Pushes for Payment System Independence 
Why Trump’s new pick for Fed chair hit gold and silver markets – for good reasons 
ECB Signals Steady Interest Rates as Fed Risks Loom Over Outlook 
BOJ Rate Decision in Focus as Yen Weakness and Inflation Shape Market Outlook 
FOMC followed through its promise and hiked rates four times in 2018 and forecasted two more rate hikes for 2019. Current Federal funds rate - 225-250 bps (Note, all calculations are based on data as of 31st December)
- January 2019 meeting: Market is attaching 1.6 percent probability that rates will be at 2.00-2.25 percent, and 98.4 percent probability that rates will be at 2.25-2.50 percent.
- March 2019 meeting: Market is attaching 1.5 percent probability that rates will be at 2.00-2.25 percent, 93.4 percent probability that rates will be at 2.25-2.50 percent, and 5.1 percent probability that rates will be at 2.50-2.75 percent.
- May 2019 meeting: Market is attaching 1.4 percent probability that rates will be at 2.00-2.25 percent, 88.8 percent probability that rates will be at 2.25-2.50 percent, 9.5 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.
- June 2019 meeting: Market is attaching 1.4 percent probability that rates will be at 2.00-2.25 percent, 84.4 percent probability that rates will be at 2.25-2.50 percent, and 13.5 percent probability that rates will be at 2.50-2.75 percent, and 0.7 percent probability that rates will be at 2.75-3.00 percent.
- July 2019 meeting: Market is attaching 2.2 percent probability that rates will be at 2.00-2.25 percent, 83.7 percent probability that rates will be at 2.25-2.50 percent, and 13.3 percent probability that rates will be at 2.50-2.75 percent, and 0.7 percent probability that rates will be at 2.75-3.00 percent.
- September 2019 meeting: Market is attaching 2.1 percent probability that rates will be at 2.00-2.25 percent, 78.1 percent probability that rates will be at 2.25-2.50 percent, and 18.2 percent probability that rates will be at 2.50-2.75 percent, 1.6 percent probability that rates will be at 2.75-3.00 percent, and 0.1 percent probability that rates will be at 3.00-3.25 percent.
- October 2019 meeting: Market is attaching 2.1 percent probability that rates will be at 2.00-2.25 percent, 78.1 percent probability that rates will be at 2.25-2.50 percent, and 18.2 percent probability that rates will be at 2.50-2.75 percent, 1.6 percent probability that rates will be at 2.75-3.00 percent, and 0.1 percent probability that rates will be at 3.00-3.25 percent.
- December 2019 meeting: Market is attaching 0.2 percent probability that rates will be at 1.75-2.00 percent, 9.9 percent probability that rates will be at 2.00-2.25 percent, and 71.9 percent probability that rates will be at 2.25-2.50 percent, 16.5 percent probability that rates will be at 2.50-2.75 percent, 1.4 percent probability that rates will be at 2.75-3.00 percent, and 0.1 percent probability that rates will be at 3.00-3.25 percent.
The probability is suggesting,
- Since our last review a week ago, the probabilities have eased further, despite two more hike forecasts by the Fed.
- The first rate hike of 2019 is priced in March with 9.8 percent probability, compared to 17.7 percent a week ago.
- The second hike for 2019 is now priced in September with a 1.7 percent probability, compared to 18.5 percent a week ago.
- The probabilities have changed significantly over the past five weeks. The market has significantly repriced.
- The market is just pricing one rate hike for 2019 with 18 percent probability, compared to 48.3 percent a week ago, which means that the market is pricing no rate hike in 2019, despite Fed’s forecast of two hikes.
- The market is now pricing a rate cut in 2019 with 10.1 percent probability.
