Fed Hike aftermath Series: Hike probabilities over coming meetings

FOMC increased interest rates in March, June and in September. Increased its forecast from three rate hikes in 2018 to four rate hikes. September decision was unanimous. Current Federal funds rate - 200-225 bps (Note, all calculations are based on data as of 8th October)

• November 2018 meeting: Market is attaching 95.4 percent probability that rates will be at 2.00-2.25 percent, and 4.6 percent probability that rates will be at 2.25-2.50 percent.
   
• December 2018 meeting: Market is attaching 16.5 percent probability that rates will be at 2.00-2.25 percent, 79.7 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.
   
• January 2019 meeting: Market is attaching 15.7 percent probability that rates will be at 2.00-2.25 percent, 76.3 percent probability that rates will be at 2.25-2.50 percent, and 8 percent probability that rates will be at 2.50-2.75 percent.
   
• March 2019 meeting: Market is attaching 4.7 percent probability that rates will be at 2.00-2.25 percent, 34 percent probability that rates will be at 2.25-2.50 percent, and 55.6 percent probability that rates will be at 2.50-2.75 percent, and 5.6 percent probability that rates will be at 2.75-3.00 percent.
   
• May 2019 meeting: Market is attaching 4.5 percent probability that rates will be at 2.00-2.25 percent, 31.6 percent probability that rates will be at 2.25-2.50 percent, and 51.5 percent probability that rates will be at 2.50-2.75 percent, and 12.4 percent probability that rates will be at 2.75-3.00 percent.
   
• June 2019 meeting: Market is attaching 1.7 percent probability that rates will be at 2.00-2.25 percent, 14.7 percent probability that rates will be at 2.25-2.50 percent, and 39.5 percent probability that rates will be at 2.50-2.75 percent, 36.4 percent probability that rates will be at 2.75-3.00 percent, 7.7 percent probability that rates will be at 3.00-3.25 percent.
   
• July 2019 meeting: Market is attaching 1.7 percent probability that rates will be at 2.00-2.25 percent, 14.4 percent probability that rates will be at 2.25-2.50 percent, and 37.8 percent probability that rates will be at 2.50-2.75 percent, 35.8 percent probability that rates will be at 2.75-3.00 percent, 9.3 percent probability that rates will be at 3.00-3.25 percent, and 1 percent probability that rates will be at 3.25-3.50 percent.
   
• September 2019 meeting: Market is attaching 1 percent probability that rates will be at 2.00-2.25 percent, 9.7 percent probability that rates will be at 2.25-2.50 percent, and 29.1 percent probability that rates will be at 2.50-2.75 percent, 36.5 percent probability that rates will be at 2.75-3.00 percent, 19.1 percent probability that rates will be at 3.00-3.25 percent, and 4.5 percent probability that rates will be at 3.25-3.50 percent.
   
• October 2019 meeting: Market is attaching 0.9 percent probability that rates will be at 2.00-2.25 percent, 8.5 percent probability that rates will be at 2.25-2.50 percent, and 27.2 percent probability that rates will be at 2.50-2.75 percent, 36.3 percent probability that rates will be at 2.75-3.00 percent, 20.9 percent probability that rates will be at 3.00-3.25 percent, and 6.1 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 83.5 percent probability compared to 80.3 percent a week ago.
• The first rate hike of 2019 is now brought forward by the market from June to March. The market is pricing the possibility of a rate hike in March next year with 61.2 percent probability.
• The second hike for 2019 is now price in September with a 60 percent probability.