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Hike probability sharply spiked after last FOMC meeting, where projection material showed that the U.S. Federal Reserve is still projecting one more hike for 2017, which is likely to be December. The November FOMC statement suggested that the Fed is on its path to a hike in December. President Trump has recently announced his pick for Fed Chair and it is Jerome Powell, who will be heading Fed once Yellen’s term expires in February next year. Current FOMC rate is at 100-125 basis points. (Note, all calculations are based on data as of 14th November)
- December 13th meeting: Market is attaching 96.7 percent probability that rates will be at 1.25-1.50 percent, and 3.3 percent probability that rates will be at 1.50-1.75 percent.
- January 2018 meeting: Market is attaching 92.7 percent probability that rates will be at 1.25-1.50 percent, 7.2 percent probability that rates will be at 1.50-1.75 percent, and 0.1 percent probability that rates will be at 1.75-2.00 percent.
- March 2018 meeting: Market is attaching 56.1 percent probability that rates will be at 1.25-1.50 percent, 40.9 percent probability that rates will be at 1.50-1.75 percent, 2.9 percent probability that rates will be at 1.75-2.00 percent, and 0.1 percent probability that rates will be at 2.00-2.25 percent.
- May 2018 meeting: Market is attaching 53.2 percent probability that rates will be at 1.25-1.50 percent, 41.7 percent probability that rates will be at 1.50-1.75 percent, 4.9 percent probability that rates will be at 1.75-2.00 percent, and 0.2 percent probability that rates will be at 2.00-2.25 percent.
- June 2018 meeting: Market is attaching 31.9 percent probability that rates will be at 1.25-1.50 percent, 46.3 percent probability that rates will be at 1.50-1.75 percent, 19.6 percent probability that rates will be at 1.75-2.00 percent, 2.1 percent probability that rates will be at 2.00-2.25, and 0.1percent probability that rates will be at 2.25-2.50 percent.
- August 2018 meeting: Market is attaching 30 percent probability that rates will be at 1.25-1.50 percent, 45.4 percent probability that rates will be at 1.50-1.75 percent, 21.2 percent probability that rates will be at 1.75-2.00 percent, 3.1 percent probability that rates will be at 2.00-2.25 percent, and 0.2 percent probability that rates will be at 2.00-2.25 percent.
- September 2018 meeting: Market is attaching 19.4 percent probability that rates will be at 1.25-1.50 percent, 40.2 percent probability that rates will be at 1.50-1.75 percent, 29.6 percent probability that rates will be at 1.75-2.00 percent, 9.4 percent probability that rates will be at 2.00-2.25 percent, 1.3 percent probability that rates will be at 2.25-2.50 percent, and 0.1 percent probability that rates will be at 2.50-2.75 percent.
The probability is suggesting,
- Hike odds have increased further, especially for the 2018 months. The market is now more than 96 percent confident of a hike in December.
- The market is pricing the next hike in June 2018 with 68.1 percent probability, which 3.6 percent higher compared to our last review on 6th November.
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