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 27th May)

• June 2019 meeting: Market is attaching 3.3 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.
   
• July 2019 meeting: Market is attaching 0.4 percent probability that rates will be at 1.75-2.00 percent, 14.9 percent probability that rates will be at 2.00-2.25 percent, and 84.7 percent probability that rates will be at 2.25-2.50 percent.
   
• September 2019 meeting: Market is attaching 5.2 percent probability that rates will be at 1.75-2.00 percent, 37.4 percent probability that rates will be at 2.00-2.25 percent, and 57.3 percent probability that rates will be at 2.25-2.50 percent.
   
• October 2019 meeting: Market is attaching 14 percent probability that rates will be at 1.75-2.00 percent, 42.1 percent probability that rates will be at 2.00-2.25 percent, and 43.8 percent probability that rates will be at 2.25-2.50 percent.
   
• December 2019 meeting: Market is attaching 6.6 percent probability that rates will be at 1.50-1.75 percent, 24.9 percent probability that rates will be at 1.75-2.00 percent, 42.8 percent probability that rates will be at 2.00-2.25 percent, and 25.7 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 tightened for near month and eased for the December month, as some FOMC members hinting at rate cuts going ahead.
• The market is pricing the possibility of a rate cut with 74.3 percent probability, compared to 70.3 percent last week, and 57.3 percent in the week before that.