BOJ Faces Pressure for Clarity, but Neutral Rate Estimates Likely to Stay Vague 
Fed Officials Split as Powell Weighs December Interest Rate Cut 
RBNZ Cuts Interest Rates Again as Inflation Cools and Recovery Remains Fragile 
Indonesia Aims to Strengthen Rupiah as Central Bank Targets 16,400–16,500 Level 
Kazakhstan Central Bank Holds Interest Rate at 18% as Inflation Pressures Persist 
Brazil Central Bank Plans $2 Billion Dollar Auctions to Support FX Liquidity 
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 7.5 percent probability that rates will be at 1.50-1.75 percent, and 92.5 percent probability that rates will be at 1.75-2.00 percent.
- August 2018 meeting: Market is attaching 7.2 percent probability that rates will be at 1.50-1.75 percent, 89.1 percent probability that rates will be at 1.75-2.00 percent, and 3.7 percent probability that rates will be at 2.00-2.25 percent.
- September 2018 meeting: Market is attaching 2.5 percent probability that rates will be at 1.50-1.75 percent, 36 percent probability that rates will be at 1.75-2.00 percent, 59 percent probability that rates will be at 2.00-2.25 percent, and 2.4 percent probability that rates will be at 2.25-2.50 percent.
- November 2018 meeting: Market is attaching 2.3 percent probability that rates will be at 1.50-1.75 percent, 33.4 percent probability that rates will be at 1.75-2.00 percent, 57.2 percent probability that rates will be at 2.00-2.25 percent, 6.8 percent probability that rates will be at 2.25-2.50 percent, and 0.2 percent probability that rates will be at 2.50-2.75 percent.
- December 2018 meeting: Market is attaching 1 percent probability that rates will be at 1.50-1.75 percent, 16.3 percent probability that rates will be at 1.75-2.00 percent, 44.1 percent probability that rates will be at 2.00-2.25 percent, 34.6 percent probability that rates will be at 2.25-2.50 percent, and 3.8 percent probability that rates will be at 2.50-2.75 percent, and 0.1 percent probability that rates will be at 2.75-3.00 percent.
- January 2019 meeting: Market is attaching 1 percent probability that rates will be at 1.50-1.75 percent, 15.3 percent probability that rates will be at 1.75-2.00 percent, 42.3 percent probability that rates will be at 2.00-2.25 percent, 35.2 percent probability that rates will be at 2.25-2.50 percent, and 5.8 percent probability that rates will be at 2.50-2.75 percent, and 0.3 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 eased for both near month and far months.
- Next hike is priced in June with 92.5 percent probability, instead of 95 percent a week ago.
- The market brought forwarded the third hike for 2018 in September and pricing it with 61.4 percent probability compared to 83.3 percent a week ago.
- The market is pricing the fourth hike in December with 38.5 percent probability instead of 53 percent probability just a week ago.
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