Indonesia Aims to Strengthen Rupiah as Central Bank Targets 16,400–16,500 Level 
RBNZ Cuts Interest Rates Again as Inflation Cools and Recovery Remains Fragile 
BOK Expected to Hold Rates at 2.50% as Housing and Currency Pressures Persist 
BOJ Faces Pressure for Clarity, but Neutral Rate Estimates Likely to Stay Vague 
FOMC followed through its promise and hiked rates four times in 2018 and forecasted two more rate hikes for 2019. Current Federal funds rate - 225-250 bps (Note, all calculations are based on data as of 7th January)
- January 2019 meeting: Market is attaching 0.5 percent probability that rates will be at 2.00-2.25 percent, and 99.5 percent probability that rates will be at 2.25-2.50 percent.
- March 2019 meeting: Market is attaching 5.6 percent probability that rates will be at 2.00-2.25 percent, and 94.3 percent probability that rates will be at 2.25-2.50 percent.
- May 2019 meeting: Market is attaching 5.5 percent probability that rates will be at 2.00-2.25 percent, 92.6 percent probability that rates will be at 2.25-2.50 percent, and 1.9 percent probability that rates will be at 2.50-2.75 percent.
- June 2019 meeting: Market is attaching 5.3 percent probability that rates will be at 2.00-2.25 percent, 89 percent probability that rates will be at 2.25-2.50 percent, and 5.6 percent probability that rates will be at 2.50-2.75 percent.
- July 2019 meeting: Market is attaching 9.9 percent probability that rates will be at 2.00-2.25 percent, 84.7 percent probability that rates will be at 2.25-2.50 percent, and 5.3 percent probability that rates will be at 2.50-2.75 percent.
- September 2019 meeting: Market is attaching 11.9 percent probability that rates will be at 2.00-2.25 percent, 82.9 percent probability that rates will be at 2.25-2.50 percent, and 5.2 percent probability that rates will be at 2.50-2.75 percent.
- October 2019 meeting: Market is attaching 17.3 percent probability that rates will be at 2.00-2.25 percent, 78.5 percent probability that rates will be at 2.25-2.50 percent, and 4.1 percent probability that rates will be at 2.50-2.75 percent.
- December 2019 meeting: Market is attaching 3 percent probability that rates will be at 1.75-2.00 percent, 22.6 percent probability that rates will be at 2.00-2.25 percent, and 70.8 percent probability that rates will be at 2.25-2.50 percent, and 3.7 percent probability that rates will be at 2.50-2.75 percent.
The probability is suggesting,
- Since our last review a week ago, the probabilities have eased further, despite two more hike forecasts by the Fed.
- The market is just pricing one rate hike for 2019 with 3.7 percent probability, compared to a8 percent a week ago and 48.3 percent in the week before that, which means that the market is pricing no rate hike in 2019, despite Fed’s forecast of two hikes.
- The market is now pricing a rate cut in 2019 with 25.6 percent probability.
