BOJ Governor Ueda Highlights Uncertainty Over Future Interest Rate Hikes 
Brazil Central Bank Plans $2 Billion Dollar Auctions to Support FX Liquidity 
Singapore Maintains Steady Monetary Outlook as Positive Output Gap Persists into 2025 
Fed Rate Cut Odds Rise as December Decision Looks Increasingly Divided 
BOJ’s Noguchi Calls for Cautious, Gradual Interest Rate Hikes to Sustain Inflation Goals 
New RBNZ Governor Anna Breman Aims to Restore Stability After Tumultuous Years 
Bank of Korea Holds Interest Rates Steady as Weak Won Limits Policy Flexibility 
In recent times, several Fed policymakers have either toned down their hawkish expectations or turned dovish. In light of that, let’s take a look at the market pricing of hikes. The current interest rate is at 0.75-1.00 percent. (Note, all calculations are based on data as of 1st June)
- June 14th Meeting: Market is attaching 9 percent probability that rates will be at 0.75-1.00 percent, and 91 percent probability that rates will be at 1.00-1.25 percent.
- July 26th meeting: Market is attaching 8 percent probability that rates will be at 0.75-1.00 percent, 87 percent probability that rates will be at 1.00-1.25 percent, and 5 percent probability that rates will be at 1.25-1.50 percent.
. - September 20th meeting: Market is attaching 6 percent probability that rates will be at 0.75-1.00 percent, 66 percent probability that rates will be at 1.00-1.25 percent, 27 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.
- November 1st meeting: Market is attaching 6 percent probability that rates will be at 0.75-1.00 percent, 64 percent probability that rates will be at 1.00-1.25 percent, 28 percent probability that rates will be at 1.25-1.50 percent, and 2 percent probability that rates will be at 1.50-1.75 percent.
- December 13th meeting: Market is attaching 4.1 percent probability that rates will be at 0.75-1.00 percent, 46 percent probability that rates will be at 1.00-1.25 percent, 39.2 percent probability that rates will be at 1.25-1.50 percent, 10.1 percent probability that rates will be at 1.50-1.75 percent, and 0.6 percent probability that rates will be at 1.75-2.00 percent.
The probability is suggesting,
- Despite some of the dovish-toned remarks from the Federal Reserve officials, the financial market is almost certain of a rate hike in June.
- Compared to our last month’s review, the hike probabilities have increased by 10-20 percent on an average. However, the financial markets are still not pricing a third rate hike for 2017.
- A rate hike probability for December increased from 46.1 percent a week ago to 49.9 percent as of today.
