Fed Rate Cut Odds Rise as December Decision Looks Increasingly Divided 
Bank of Korea Holds Interest Rates Steady as Weak Won Limits Policy Flexibility 
Singapore Maintains Steady Monetary Outlook as Positive Output Gap Persists into 2025 
BOJ Signals Imminent Interest Rate Hike Amid Strengthening Economic Conditions 
Indonesia Aims to Strengthen Rupiah as Central Bank Targets 16,400–16,500 Level 
Fed Meeting Sparks Division as Markets Brace for Possible Rate Cut 
FOMC increased interest rates in March and maintained its forecast for three rate hikes in 2018. FOMC also forecasted a faster pace of hikes next year than previously forecasted. March decision was unanimous. Current Federal funds rate - 150-175 bps (Note, all calculations are based on data as of 14th May)
- June 2018 meeting: Market is attaching 7.5 percent probability that rates will be at 1.50-1.75 percent, and 92.5 percent probability that rates will be at 1.75-2.00 percent.
- August 2018 meeting: Market is attaching 7.2 percent probability that rates will be at 1.50-1.75 percent, 89.1 percent probability that rates will be at 1.75-2.00 percent, and 3.7 percent probability that rates will be at 2.00-2.25 percent.
- September 2018 meeting: Market is attaching 2.5 percent probability that rates will be at 1.50-1.75 percent, 36 percent probability that rates will be at 1.75-2.00 percent, 59 percent probability that rates will be at 2.00-2.25 percent, and 2.4 percent probability that rates will be at 2.25-2.50 percent.
- November 2018 meeting: Market is attaching 2.3 percent probability that rates will be at 1.50-1.75 percent, 33.4 percent probability that rates will be at 1.75-2.00 percent, 57.2 percent probability that rates will be at 2.00-2.25 percent, 6.8 percent probability that rates will be at 2.25-2.50 percent, and 0.2 percent probability that rates will be at 2.50-2.75 percent.
- December 2018 meeting: Market is attaching 1 percent probability that rates will be at 1.50-1.75 percent, 16.3 percent probability that rates will be at 1.75-2.00 percent, 44.1 percent probability that rates will be at 2.00-2.25 percent, 34.6 percent probability that rates will be at 2.25-2.50 percent, and 3.8 percent probability that rates will be at 2.50-2.75 percent, and 0.1 percent probability that rates will be at 2.75-3.00 percent.
- January 2019 meeting: Market is attaching 1 percent probability that rates will be at 1.50-1.75 percent, 15.3 percent probability that rates will be at 1.75-2.00 percent, 42.3 percent probability that rates will be at 2.00-2.25 percent, 35.2 percent probability that rates will be at 2.25-2.50 percent, and 5.8 percent probability that rates will be at 2.50-2.75 percent, and 0.3 percent probability that rates will be at 2.75-3.00 percent.
The probability is suggesting,
- Since our last review a week ago, the probability has eased for both near month and far months.
- Next hike is priced in June with 92.5 percent probability, instead of 95 percent a week ago.
- The market brought forwarded the third hike for 2018 in September and pricing it with 61.4 percent probability compared to 83.3 percent a week ago.
- The market is pricing the fourth hike in December with 38.5 percent probability instead of 53 percent probability just a week ago.
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