BOJ Policymakers Warn Weak Yen Could Fuel Inflation Risks and Delay Rate Action 
RBA Expected to Raise Interest Rates by 25 Basis Points in February, ANZ Forecast Says 
BOJ Rate Decision in Focus as Yen Weakness and Inflation Shape Market Outlook 
Bank of Canada Holds Interest Rate at 2.25% Amid Trade and Global Uncertainty 
Bank of Korea Expected to Hold Interest Rates as Weak Won Limits Policy Easing 
ECB’s Cipollone Backs Digital Euro as Europe Pushes for Payment System Independence 
Markets React as Tensions Rise Between White House and Federal Reserve Over Interest Rate Pressure 
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 8th July)
- July 2019 meeting: Market is attaching 8 percent probability that rates will be at 1.75-2.00 percent, and 92 percent probability that rates will be at 2.00-2.25 percent.
- September 2019 meeting: Market is attaching 5.5 percent probability that rates will be at 1.50-1.75 percent, 66.2 percent probability that rates will be at 1.75-2.00 percent, and 28.3 percent probability that rates will be at 2.25-2.50 percent.
- October 2019 meeting: Market is attaching 1.9 percent probability that rates will be at 1.25-1.50 percent, 26.3 percent probability that rates will be at 1.50-1.75 percent, 53.2 percent probability that rates will be at 1.75-2.00 percent, and 18.6 percent probability that rates will be at 2.00-2.25 percent.
- December 2019 meeting: Market is attaching 12.4 percent probability that rates will be at 1.25-1.50 percent, 37 percent probability that rates will be at 1.50-1.75 percent, 39.4 percent probability that rates will be at 1.75-2.00 percent, and 11.2 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 tightened on the back of stronger economic numbers from the United States.
- The market is pricing the possibility of a rate cut with 100 percent probability, compared to 100 percent last week.
- The market is pricing a second rate cut with 88.8 percent probability, compared to 90.3 percent a week ago, and 93.8 percent in the week before that.
- The market is also pricing a third rate cut in 2019 with 49.4 percent probability, compared to 53.6 percent a week ago, and 65 percent in the week before that.
- The first rate cut is priced in July 2019 with 100 percent probability. The second rate cut is priced in September with 71.7 percent probability.
