Chile Central Bank Holds Interest Rate at 4.5% as Inflation and Global Risks Persist 
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BOJ Minutes Signal More Rate Hikes as Inflation Risks Grow 
RBA Signals More Rate Hikes Possible as Australia Battles Stubborn Inflation 
BOJ Expected to Hold Rates Steady While Signaling More Hikes Ahead 
RBI Holds Repo Rate at 5.25% as Inflation Risks and Global Uncertainty Persist 
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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 7th January)
- January 2019 meeting: Market is attaching 99.5 percent probability that rates will be at 2.25-2.50 percent, and 0.5 percent probability that rates will be at 2.50-2.75 percent.
- March 2019 meeting: Market is attaching 99.5 percent probability that rates will be at 2.25-2.50 percent, and 0.5 percent probability that rates will be at 2.50-2.75 percent.
- May 2019 meeting: Market is attaching 93.5 percent probability that rates will be at 2.25-2.50 percent, and 6.5 percent probability that rates will be at 2.50-2.75 percent.
- June 2019 meeting: Market is attaching 87.3 percent probability that rates will be at 2.25-2.50 percent, and 12.8 percent probability that rates will be at 2.50-2.75 percent.
- July 2019 meeting: Market is attaching 0.9 percent probability that rates will be at 2.00-2.25 percent, 86.5 percent probability that rates will be at 2.25-2.50 percent, and 12.7 percent probability that rates will be at 2.50-2.75 percent.
- September 2019 meeting: Market is attaching 2.9 percent probability that rates will be at 2.00-2.25 percent, 84.8 percent probability that rates will be at 2.25-2.50 percent, and 12.3 percent probability that rates will be at 2.50-2.75 percent.
- October 2019 meeting: Market is attaching 6.5 percent probability that rates will be at 2.00-2.25 percent, 81.7 percent probability that rates will be at 2.25-2.50 percent, and 11.8 percent probability that rates will be at 2.50-2.75 percent.
- December 2019 meeting: Market is attaching 1 percent probability that rates will be at 1.75-2.00 percent, 16.4 percent probability that rates will be at 2.00-2.25 percent, and 72.3 percent probability that rates will be at 2.25-2.50 percent, and 10.3 percent probability that rates will be at 2.50-2.75 percent.
The probability is suggesting,
- Since our last review a week ago, the probabilities have taken a turn from dovish to hawkish.
- The market is just pricing one rate hike for 2019 with 10.3 percent probability, compared to a 3.7 percent a week ago and 8 percent in the week before that, 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 17.4 percent probability, compared to 25.6 percent a week ago.
