In recent times, several Fed policymakers have either toned down their hawkish expectations or turned dovish. However, still, a majority of the policymakers are still hawkish on the hike outlook. In light of that, let’s take a look at the market pricing of hikes. The current interest rate is at 1.00-1.25 percent. (Note, all calculations are based on data as of 12th July)

• July 26th meeting: Market is attaching 97 percent probability that rates will be at 1.00-1.25 percent, and 3 percent probability that rates will be at 1.25-1.50 percent.
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• September 20th meeting: Market is attaching 86 percent probability that rates will be at 1.00-1.25 percent, 13.5 percent probability that rates will be at 1.25-1.50 percent, and 0.5 percent probability that rates will be at 1.50-1.75 percent.
  
• November 1st meeting: Market is attaching 85 percent probability that rates will be at 1.00-1.25 percent, 14 percent probability that rates will be at 1.25-1.50 percent, and 1 percent probability that rates will be at 1.50-1.75 percent.
  
• December 13th meeting: Market is attaching 43 percent probability that rates will be at 1.00-1.25 percent, 49 percent probability that rates will be at 1.25-1.50 percent, 7.5 percent probability that rates will be at 1.50-1.75 percent, and 0.5 percent probability that rates will be at 1.75-2.00 percent.
  
• January 2018 meeting: Market is attaching 42 percent probability that rates will be at 1.00-1.25 percent, 49 percent probability that rates will be at 1.25-1.50 percent, 8 percent probability that rates will be at 1.50-1.75 percent, and 1 percent probability that rates will be at 1.75-2.00 percent.
  
• March 2018 meeting: Market is attaching 31.5 percent probability that rates will be at 1.00-1.25 percent, 47 percent probability that rates will be at 1.25-1.50 percent, 19 percent probability that rates will be at 1.50-1.75 percent, and 2.5 percent probability that rates will be at 1.75-2.00 percent.
  
• May 2018 meeting: Market is attaching 32.4 percent probability that rates will be at 1.00-1.25 percent, 46.2 percent probability that rates will be at 1.25-1.50 percent, 18.6 percent probability that rates will be at 1.50-1.75 percent, 2.7 percent probability that rates will be at 1.75-2.00 percent, and 0.2 percent probability that rates will be at 2.00-2.25 percent.
  
• June 2018 meeting: Market is attaching 23.2 percent probability that rates will be at 1.00-1.25 percent, 42.2 percent probability that rates will be at 1.25-1.50 percent, 26.3 percent probability that rates will be at 1.50-1.75 percent, 7.2 percent probability that rates will be at 1.75-2.00 percent, and 1 percent probability that rates will be at 2.00-2.25 percent.
  

The probability is suggesting,

• Despite some of the dovish-toned remarks from the Federal Reserve officials, the Financial is currently pricing the third hike in December with 57 percent probability.
• Interestingly, the market is not pricing another hike for the first six months of 2018. In June 2 the 18, probability of a hike stands at 34.5 percent.
• We are currently expecting the third rate hike in December and the beginning of balance sheet trimming in September.