Bank of Japan Faces Rate Uncertainty Amid Middle East Oil Shock 
Bank of Korea Governor Nominee Warns of Action if Korean Won Weakens Further 
Bank of Japan's Ueda Flags Low Real Interest Rates as Key Factor in Rate Hike Timing 
Citigroup Delays Fed Rate Cut Forecast Amid Strong Jobs Data and Inflation Concerns 
Morgan Stanley: Fed Rate Cuts Still on Track Despite Oil-Driven Inflation 
RBNZ Holds Rates at 2.25% as Middle East Conflict Fuels Inflation Concerns 
RBI Clamps Down on Rupee NDF Activity, Banks Face Steeper Losses 
Bank of Korea Nominee Shin Hyun-song Signals Possible Rate Hike Amid Middle East Inflation Fears 
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 11th June)
- June 2018 meeting: Market is attaching 8.7 percent probability that rates will be at 1.50-1.75 percent, and 91.3 percent probability that rates will be at 1.75-2.00 percent.
- August 2018 meeting: Market is attaching 8.6 percent probability that rates will be at 1.50-1.75 percent, 89.6 percent probability that rates will be at 1.75-2.00 percent, and 1.8 percent probability that rates will be at 2.00-2.25 percent.
- September 2018 meeting: Market is attaching 2.3 percent probability that rates will be at 1.50-1.75 percent, 30.3 percent probability that rates will be at 1.75-2.00 percent, 66.1 percent probability that rates will be at 2.00-2.25 percent, and 1.3 percent probability that rates will be at 2.25-2.50 percent.
- November 2018 meeting: Market is attaching 2.1 percent probability that rates will be at 1.50-1.75 percent, 27.5 percent probability that rates will be at 1.75-2.00 percent, 64.7 percent probability that rates will be at 2.00-2.25 percent, 5.6 percent probability that rates will be at 2.25-2.50 percent, and 0.1 percent probability that rates will be at 2.50-2.75 percent.
- December 2018 meeting: Market is attaching 0.9 percent probability that rates will be at 1.50-1.75 percent, 13.5 percent probability that rates will be at 1.75-2.00 percent, 44.2 percent probability that rates will be at 2.00-2.25 percent, 38.2 percent probability that rates will be at 2.25-2.50 percent, and 3.2 percent probability that rates will be at 2.50-2.75 percent.
- January 2019 meeting: Market is attaching 0.8 percent probability that rates will be at 1.50-1.75 percent, 12.4 percent probability that rates will be at 1.75-2.00 percent, 41.6 percent probability that rates will be at 2.00-2.25 percent, 38.7 percent probability that rates will be at 2.25-2.50 percent, and 6.1 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 not changed much.
- Next hike is priced in June with 91.3 percent probability, same as a week ago.
- The market brought forwarded the third hike for 2018 in September and pricing it with 67.4 percent probability compared to 68.5 percent a week ago.
- The market is pricing the fourth hike in December with 41.4 percent probability instead of 36.4 percent probability just a week ago.
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