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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 22nd July)
- July 2019 meeting: Market is attaching 22.5 percent probability that rates will be at 1.75-2.00 percent, and 77.5 percent probability that rates will be at 2.00-2.25 percent.
- September 2019 meeting: Market is attaching 15 percent probability that rates will be at 1.50-1.75 percent, 59.3 percent probability that rates will be at 1.75-2.00 percent, and 25.7 percent probability that rates will be at 2.25-2.50 percent.
- October 2019 meeting: Market is attaching 7.5 percent probability that rates will be at 1.25-1.50 percent, 37.3 percent probability that rates will be at 1.50-1.75 percent, 42.4 percent probability that rates will be at 1.75-2.00 percent, and 12.8 percent probability that rates will be at 2.00-2.25 percent.
- December 2019 meeting: Market is attaching 21.9 percent probability that rates will be at 1.25-1.50 percent, 39.2 percent probability that rates will be at 1.50-1.75 percent, 31 percent probability that rates will be at 1.75-2.00 percent, and 7.9 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 on the back of Fed speakers signaling rate cuts.
- 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 92.1 percent probability, compared to 89.6 percent a week ago, and 88.8 percent in the week before that.
- The market is also pricing a third rate cut in 2019 with 53.5 percent probability, compared to 49.4 percent a week ago, and 61.1 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 October with 87.2 percent probability.
