Paraguay Holds Interest Rate at 5.5% as Inflation Remains Stable Amid Global Uncertainty 
OECD Sees Bank of Japan Raising Interest Rates to 2% by 2027 
DOJ Ends Probe Into Fed Chair Jerome Powell, Boosting Kevin Warsh Confirmation Prospects 
BOJ Governor Kazuo Ueda Hints at Rate Hike as Inflation Pressures Build 
Japan Inflation Expectations Rise as BOJ Rate Hike Timing Faces Uncertainty 
FOMC increased interest rates in March and June and increased its forecast from three rate hikes in 2018 to four rate hikes. June decision was unanimous. Current Federal funds rate - 175-200 bps (Note, all calculations are based on data as of 2nd July)
- August 2018 meeting: Market is attaching 96.5 percent probability that rates will be at 1.75-2.00 percent, and 3.5 percent probability that rates will be at 2.00-2.25 percent.
- September 2018 meeting: Market is attaching 24.7 percent probability that rates will be at 1.75-2.00 percent, 72.7 percent probability that rates will be at 2.00-2.25 percent, and 2.6 percent probability that rates will be at 2.25-2.50 percent.
- November 2018 meeting: Market is attaching 23.4 percent probability that rates will be at 1.75-2.00 percent, 70.2 percent probability that rates will be at 2.00-2.25 percent, and 6.4 percent probability that rates will be at 2.25-2.50 percent.
- December 2018 meeting: Market is attaching 9.7 percent probability that rates will be at 1.75-2.00 percent, 42.8 percent probability that rates will be at 2.00-2.25 percent, 43.7 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.
- January 2019 meeting: Market is attaching 8.8 percent probability that rates will be at 1.75-2.00 percent, 39.6 percent probability that rates will be at 2.00-2.25 percent, 43.6 percent probability that rates will be at 2.25-2.50 percent, and 7.6 percent probability that rates will be at 2.50-2.75 percent, and 0.4 percent probability that rates will be at 2.75-3.00 percent.
The probability is suggesting,
- Since our last review a week ago, the probabilities have tightened for the near month and eased for the far month.
- The market is pricing the third hike for 2018 in September and pricing it with 75.3 percent probability compared to 70.8 percent a week ago.
- The market is pricing the fourth hike in December with 47.5 percent probability instead of 49.7 percent probability just a week ago.
- It is important to note that despite Fed’s forecast, the market is not ready to price in a fourth hike.
