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BOJ Faces Pressure for Clarity, but Neutral Rate Estimates Likely to Stay Vague 
FOMC increased interest rates in March and maintained its forecast for three rate hikes in 2018. FOMC also forecasted a faster pace of hikes next year than previously forecasted. March decision was unanimous. Current Federal funds rate - 150-175 bps (Note, all calculations are based on data as of 14th May)
- June 2018 meeting: Market is attaching 100 percent probability that rates will be at 1.75-2.00 percent.
- August 2018 meeting: Market is attaching 94 percent probability that rates will be at 1.75-2.00 percent, and 6 percent probability that rates will be at 2.00-2.25 percent.
- September 2018 meeting: Market is attaching 21.8 percent probability that rates will be at 1.75-2.00 percent, 73.6 percent probability that rates will be at 2.00-2.25 percent, and 4.6 percent probability that rates will be at 2.25-2.50 percent.
- November 2018 meeting: Market is attaching 19.5 percent probability that rates will be at 1.75-2.00 percent, 68.2 percent probability that rates will be at 2.00-2.25 percent, 11.8 percent probability that rates will be at 2.25-2.50 percent, and 0.5 percent probability that rates will be at 2.50-2.75 percent.
- December 2018 meeting: Market is attaching 9.4 percent probability that rates will be at 1.75-2.00 percent, 43 percent probability that rates will be at 2.00-2.25 percent, 40.9 percent probability that rates will be at 2.25-2.50 percent, 6.3 percent probability that rates will be at 2.50-2.75 percent, and 0.2 percent probability that rates will be at 2.75-3.00 percent.
The probability is suggesting,
- Since our last review a week ago, the probability has tightened for both near months and for far months.
- Next hike is priced in June with 100 percent probability, instead of 95 percent a week ago.
- The market brought forwarded the third hike for 2018 in September and pricing it with 78.2 percent probability compared to 70 percent a week ago.
- The market is pricing the fourth hike in December with 47.4 percent probability instead of 45.6 percent probability just a week ago.
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