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Fed Hike aftermath Series: Hike probabilities over coming meetings

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 25th March)

  • May 2019 meeting: Market is attaching 2 percent probability that rates will be at 2.00-2.25 percent, and 98 percent probability that rates will be at 2.25-2.50 percent.
     
  • June 2019 meeting: Market is attaching 15.1 percent probability that rates will be at 2.00-2.25 percent, and 84.9 percent probability that rates will be at 2.25-2.50 percent.
     
  • July 2019 meeting: Market is attaching 23.8 percent probability that rates will be at 2.00-2.25 percent, and 76.2 percent probability that rates will be at 2.25-2.50 percent.
     
  • September 2019 meeting: Market is attaching 37.8 percent probability that rates will be at 2.00-2.25 percent, and 62.2 percent probability that rates will be at 2.25-2.50 percent.
     
  • October 2019 meeting: Market is attaching 43.8 percent probability that rates will be at 2.00-2.25 percent, and 56.1 percent probability that rates will be at 2.25-2.50 percent.
     
  • December 2019 meeting: Market is attaching 2.2 percent probability that rates will be at 1.50-1.75 percent, 13.2 percent probability that rates will be at 1.75-2.00 percent, 39 percent probability that rates will be at 2.00-2.25 percent, and 45.4 percent probability that rates will be at 2.25-2.50 percent.
     

The probability is suggesting,

  • Since our last review a week ago, the probabilities have significantly eased as the Federal Reserve forecasted no further rate hike in 2019.
  • However, the market is pricing the possibility of a rate cut with 54.6 percent probability, compared to 26.4 percent last week, and 16.1 percent in the week before that.  
By Saanando Das
  • Market Data
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