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Financial market participants are almost sure that a rate hike is coming from the US Federal Reserve this week, despite the recent weakness in some of the key economic dockets. For example, in the month of May, the US economy added just 138,000 jobs, a much lower figure than 185,000 expected. Fed Participants will hold their two-day meeting and announce the decision on Wednesday. Let’s look at the hike probabilities, heading into the Fed meeting.
- The financial futures market is pricing a 99.2 percent chance that Federal Reserve will deliver a 25 basis points rate hike at this week’s meeting.
The financial market is also pricing a higher likelihood of a third rate hike for 2017 as Fed policymakers maintained a hawkish tone, despite weak data.
- Fed funds future is currently pricing 55 percent chance that the Federal Reserve will hike interest rates again in December after a hike this week.
We at FxWirePro suspect that while Fed will hike in this week, the decision will not be unanimous. Moreover, the number of dissenters could increase, in addition to Mr. Neel Kashkari, who had already dissented at the March meeting.
However, a hike is unlikely to materially undermine the performance of S&P 500 benchmark, which is currently trading at
