Fed Hike aftermath Series: Hike probabilities over coming meetings

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 18th March)

• March 2019 meeting: Market is attaching 1.3 percent probability that rates will be at 2.00-2.25 percent, and 98.7 percent probability that rates will be at 2.25-2.50 percent.
   
• May 2019 meeting: Market is attaching 3.2 percent probability that rates will be at 2.00-2.25 percent, and 96.7 percent probability that rates will be at 2.25-2.50 percent.
   
• June 2019 meeting: Market is attaching 9.7 percent probability that rates will be at 2.00-2.25 percent, and 90.3 percent probability that rates will be at 2.25-2.50 percent.
   
• July 2019 meeting: Market is attaching 13.4 percent probability that rates will be at 2.00-2.25 percent, and 86.6 percent probability that rates will be at 2.25-2.50 percent.
   
• September 2019 meeting: Market is attaching 17.4 percent probability that rates will be at 2.00-2.25 percent, and 82.6 percent probability that rates will be at 2.25-2.50 percent.
   
• October 2019 meeting: Market is attaching 19.2 percent probability that rates will be at 2.00-2.25 percent, and 80.8 percent probability that rates will be at 2.25-2.50 percent.
   
• December 2019 meeting: Market is attaching 26.4 percent probability that rates will be at 2.00-2.25 percent, and 73.6 percent probability that rates will be at 2.25-2.50 percent.

The probability is suggesting,

• Since our last review a week ago, the probabilities have significantly eased.
• The market is pricing no rate hike for 2019.
• However, the market is pricing the possibility of a rate cut with 26.4 percent probability, compared to 16.1 percent last week, and 0 percent in the week before that.