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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 15th April)

  • May 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.
     
  • June 2019 meeting: Market is attaching 10.4 percent probability that rates will be at 2.00-2.25 percent, and 89.6 percent probability that rates will be at 2.25-2.50 percent.
     
  • July 2019 meeting: Market is attaching 12.3 percent probability that rates will be at 2.00-2.25 percent, and 87.7 percent probability that rates will be at 2.25-2.50 percent.
     
  • September 2019 meeting: Market is attaching 28.4 percent probability that rates will be at 2.00-2.25 percent, and 71.6 percent probability that rates will be at 2.25-2.50 percent.
     
  • October 2019 meeting: Market is attaching 31.6 percent probability that rates will be at 2.00-2.25 percent, and 68.4 percent probability that rates will be at 2.25-2.50 percent.
     
  • December 2019 meeting: Market is attaching 0.7 percent probability that rates will be at 1.50-1.75 percent, 7.4 percent probability that rates will be at 1.75-2.00 percent, 34.5 percent probability that rates will be at 2.00-2.25 percent, and 57.3 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 sizably tightened but still quite dovish.
  • The market is pricing the possibility of a rate cut with 42.7 percent probability, compared to 53.5 percent last week, and 58 percent in the week before that.  
By Saanando Das
  • Market Data
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