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FOMC increased interest rates in March and June and increased its forecast from three rate hikes in 2018 to four rate hikes. June decision was unanimous. Current Federal funds rate - 175-200 bps (Note, all calculations are based on data as of 1st October)
- November 2018 meeting: Market is attaching 99.3 percent probability that rates will be at 2.00-2.25 percent, and 0.7 percent probability that rates will be at 2.25-2.50 percent.
- December 2018 meeting: Market is attaching 20.6 percent probability that rates will be at 2.00-2.25 percent, 78.8 percent probability that rates will be at 2.25-2.50 percent, and 0.5 percent probability that rates will be at 2.50-2.75 percent.
- January 2019 meeting: Market is attaching 19.8 percent probability that rates will be at 2.00-2.25 percent, 76.4 percent probability that rates will be at 2.25-2.50 percent, and 3.9 percent probability that rates will be at 2.50-2.75 percent.
- March 2019 meeting: Market is attaching 8.5 percent probability that rates will be at 2.00-2.25 percent, 44.2 percent probability that rates will be at 2.25-2.50 percent, and 45.1 percent probability that rates will be at 2.50-2.75 percent, and 2.2 percent probability that rates will be at 2.75-3.00 percent.
- May 2019 meeting: Market is attaching 7.5 percent probability that rates will be at 2.00-2.25 percent, 39.9 percent probability that rates will be at 2.25-2.50 percent, and 45 percent probability that rates will be at 2.50-2.75 percent, and 7.6 percent probability that rates will be at 2.75-3.00 percent.
- June 2019 meeting: Market is attaching 4 percent probability that rates will be at 2.00-2.25 percent, 24.8 percent probability that rates will be at 2.25-2.50 percent, and 42.6 percent probability that rates will be at 2.50-2.75 percent, 24.9 percent probability that rates will be at 2.75-3.00 percent, 3.7 percent probability that rates will be at 3.00-3.25 percent.
- July 2019 meeting: Market is attaching 3.6 percent probability that rates will be at 2.00-2.25 percent, 22.6 percent probability that rates will be at 2.25-2.50 percent, and 40.8 percent probability that rates will be at 2.50-2.75 percent, 26.7 percent probability that rates will be at 2.75-3.00 percent, 6.3 percent probability that rates will be at 3.00-3.25 percent.
- September 2019 meeting: Market is attaching 2.5 percent probability that rates will be at 2.00-2.25 percent, 16.9 percent probability that rates will be at 2.25-2.50 percent, and 35.3 percent probability that rates will be at 2.50-2.75 percent, 30.9 percent probability that rates will be at 2.75-3.00 percent, 12.1 percent probability that rates will be at 3.00-3.25 percent, and 2.3 percent probability that rates will be at 3.25-3.50 percent.
- October 2019 meeting: Market is attaching 2.4 percent probability that rates will be at 2.00-2.25 percent, 16.2 percent probability that rates will be at 2.25-2.50 percent, and 34.3 percent probability that rates will be at 2.50-2.75 percent, 31.2 percent probability that rates will be at 2.75-3.00 percent, 13.1 percent probability that rates will be at 3.00-3.25 percent, and 2.9 percent probability that rates will be at 3.25-3.50 percent.
The probability is suggesting,
- Since our last review a week ago, the probabilities have eased for far months.
- The market is pricing the fourth hike in December with 80.3 percent probability compared to 87.2 percent a week ago.
- The first rate hike of 2019 is now pushed back by the market from March to June. The market is pricing the possibility of a rate hike in June next year with 71.2 percent probability.
