BOJ Rate Decision in Focus as Yen Weakness and Inflation Shape Market Outlook 
Bank of Japan Signals Readiness for Near-Term Rate Hike as Inflation Nears Target 
Federal Reserve Faces Subpoena Delay Amid Investigation Into Chair Jerome Powell 
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 4th February)
- March 2019 meeting: Market is attaching 98.7 percent probability that rates will be at 2.25-2.50 percent, and 1.3 percent probability that rates will be at 2.50-2.75 percent.
- May 2019 meeting: Market is attaching 98.7 percent probability that rates will be at 2.25-2.50 percent, and 1.3 percent probability that rates will be at 2.50-2.75 percent.
- June 2019 meeting: Market is attaching 95.4 percent probability that rates will be at 2.25-2.50 percent, and 4.6 percent probability that rates will be at 2.50-2.75 percent.
- July 2019 meeting: Market is 1.2 percent probability that rates will be at 2.00-2.25 percent, and 95.5 percent probability that rates will be at 2.25-2.50 percent, and 3.3 percent probability that rates will be at 2.50-2.75 percent.
- September 2019 meeting: Market is 1.2 percent probability that rates will be at 2.00-2.25 percent, and 95.5 percent probability that rates will be at 2.25-2.50 percent, and 3.3 percent probability that rates will be at 2.50-2.75 percent.
- October 2019 meeting: Market is 1.2 percent probability that rates will be at 2.00-2.25 percent, and 95.5 percent probability that rates will be at 2.25-2.50 percent, and 3.3 percent probability that rates will be at 2.50-2.75 percent.
- December 2019 meeting: Market is 8.5 percent probability that rates will be at 2.00-2.25 percent, and 87.4 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.
The probability is suggesting,
- Since our last review a week ago, the probabilities have loosened, especially after Federal Reserve announcement that the central bank would remain patient on future rate hikes.
- The market is pricing just one rate hike for 2019 and that with just 4.1 percent probability, compared to a 26.2 percent a week ago and 23.4 percent in the week before that, which means that the market far from pricing a rate hike in 2019, despite Fed’s forecast of two hikes.
- The market is now pricing a rate cut in 2019 with 8.5 percent probability, compared to 4.3 percent a week ago, and 4.4 percent probability, a week before that.
