BOJ Rate Decision in Focus as Yen, Inflation, and Nikkei Hang in Balance 
Bank of Korea Signals Potential Interest Rate Hikes as Inflation Remains Elevated 
Japan Inflation Expectations Rise as BOJ Rate Hike Timing Faces Uncertainty 
ECB Signals Possible Interest Rate Move if Inflation Outlook Fails to Improve 
Bank of England Set to Hold Interest Rates as Inflation Risks and Iran War Impact Loom 
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 1st July)
- July 2019 meeting: Market is attaching 21.4 percent probability that rates will be at 1.75-2.00 percent, and 78.6 percent probability that rates will be at 2.00-2.25 percent.
- September 2019 meeting: Market is attaching 12.9 percent probability that rates will be at 1.50-1.75 percent, 60.4 percent probability that rates will be at 1.75-2.00 percent, and 26.7 percent probability that rates will be at 2.25-2.50 percent.
- October 2019 meeting: Market is attaching 5.1 percent probability that rates will be at 1.25-1.50 percent, 30.6 percent probability that rates will be at 1.50-1.75 percent, 48.4 percent probability that rates will be at 1.75-2.00 percent, and 15.9 percent probability that rates will be at 2.00-2.25 percent.
- December 2019 meeting: Market is attaching 15 percent probability that rates will be at 1.25-1.50 percent, 36.9 percent probability that rates will be at 1.50-1.75 percent, 35.7 percent probability that rates will be at 1.75-2.00 percent, and 10.7 percent probability that rates will be at 2.00-2.25 percent.
The probability is suggesting,
- Since our last review a week ago, the probabilities have eased to some extent as U.S. China to resume negotiations after a successful G20 meeting between President Trump and President Xi Jinping.
- The market is pricing the possibility of a rate cut with 100 percent probability, compared to 100 percent last week, and 98.7 percent in the week before that.
- The market is pricing a second rate cut with 90.3 percent probability, compared to 93.8 percent a week ago, and 87.2 percent in the week before that.
- The market is also pricing a third rate cut in 2019 with 53.6 percent probability, compared to 65 percent a week ago.
- The first rate is priced in July 2019 with 100 percent probability. The second rate cut is priced in September with 82.2 percent probability.
