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Fed Hike aftermath Series: Hike probabilities over next 12 months

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. Before the meeting, the market was pricing no more hikes until the first half of 2018. Let’s take a look at the latest hike odds for the next 12 months. (Note, all calculations are based on data as of 2nd October)

  • November 1st meeting: Market is attaching 98.5 percent probability that rates will be at 1.00-1.25 percent, and 1.5 percent probability that rates will be at 1.25-1.50 percent.
  • December 13th meeting: Market is attaching 17.1 percent probability that rates will be at 1.00-1.25 percent, 81.7 percent probability that rates will be at 1.25-1.50 percent, and 1.2 percent probability that rates will be at 1.50-1.75 percent.
  • January 2018 meeting: Market is attaching 16.5 percent probability that rates will be at 1.00-1.25 percent, 79.7 percent probability that rates will be at 1.25-1.50 percent, and 3.7 percent probability that rates will be at 1.50-1.75 percent.
  • March 2018 meeting: Market is attaching 12.3 percent probability that rates will be at 1.00-1.25 percent, 63.7 percent probability that rates will be at 1.25-1.50 percent, 23 percent probability that rates will be at 1.50-1.75 percent, and 1 percent probability that rates will be at 1.75-2.00 percent.
  • May 2018 meeting: Market is attaching 11.8 percent probability that rates will be at 1.00-1.25 percent, 61.5 percent probability that rates will be at 1.25-1.50 percent, 24.7 percent probability that rates will be at 1.50-1.75 percent, and 1.9 percent probability that rates will be at 1.75-2.00 percent.
  • June 2018 meeting: Market is attaching 9.5 percent probability that rates will be at 1.00-1.25 percent, 42.6 percent probability that rates will be at 1.25-1.50 percent, 36.7 percent probability that rates will be at 1.50-1.75 percent, 10.3 percent probability that rates will be at 1.75-2.00 percent, and 0.8 percent probability that rates will be at 2.00-2.25 percent.
  • August 2018 meeting: Market is attaching 9.3 percent probability that rates will be at 1.00-1.25 percent, 41.9 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, 10.9 percent probability that rates will be at 1.75-2.00 percent, and 1 percent probability that rates will be at 2.00-2.25 percent.
  • September 2018 meeting: Market is attaching 6.3 percent probability that rates will be at 1.00-1.25 percent, 31.3 percent probability that rates will be at 1.25-1.50 percent, 38.5 percent probability that rates will be at 1.50-1.75 percent, 19.3 percent probability that rates will be at 1.75-2.00 percent, 4.2 percent probability that rates will be at 2.00-2.25 percent, and 0.3 percent probability that rates will be at 2.25-2.50 percent.

The probability is suggesting,

  • Hike odds have increased sharply, especially for December by more than 20 percent as FOMC maintained its outlook for a third hike this year.
  • It is, however, important to note that the market is not pricing any hike for the first half of 2018. After December, the market is pricing next hike in September 2018 with 62.3 percent probability.
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November 24 15:30 UTC Released

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145.6 %

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145.6 %

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54.6 %

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54.6 %

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-1.559 Bln USD

November 27 15:30 UTC 35833583m

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27.6

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Actual

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10.7 %

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