Brazil Cuts Selic Rate to 14% as Inflation Eases but Risks Persist 
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Japan Services Producer Prices Rise 3.2% in June, Supporting BOJ Rate Hike Expectations 
Chile Central Bank Holds Interest Rate at 4.5% as Inflation and Global Risks Persist 
Japan Economy Minister Downplays Inflation Risks Despite BOJ Warning 
Fed Holds Interest Rates Steady as Kevin Warsh Says Rising Treasury Yields Tighten Financial Conditions 
Japan PM Sanae Takaichi Unveils Growth Plan as BOJ Independence Concerns Lift Bond Yields 
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 13th August)
- September 2018 meeting: Market is attaching 6.4 percent probability that rates will be at 1.75-2.00 percent, and 93.6 percent probability that rates will be at 2.00-2.25 percent.
- November 2018 meeting: Market is attaching 6.4 percent probability that rates will be at 1.75-2.00 percent, 93.6 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.
- December 2018 meeting: Market is attaching 2.2 percent probability that rates will be at 1.75-2.00 percent, 36.5 percent probability that rates will be at 2.00-2.25 percent, and 61.3 percent probability that rates will be at 2.25-2.50 percent.
- January 2019 meeting: Market is attaching 2.3 percent probability that rates will be at 1.75-2.00 percent, 37.9 percent probability that rates will be at 2.00-2.25 percent, 57.2 percent probability that rates will be at 2.25-2.50 percent, and 2.5 percent probability that rates will be at 2.50-2.75 percent.
- March 2019 meeting: Market is attaching 1.2 percent probability that rates will be at 1.75-2.00 percent, 21.4 percent probability that rates will be at 2.00-2.25 percent, 48.3 percent probability that rates will be at 2.25-2.50 percent, and 27.9 percent probability that rates will be at 2.50-2.75 percent, and 1.2 percent probability that rates will be at 2.75-3.00 percent.
- May 2019 meeting: Market is attaching 1.1 percent probability that rates will be at 1.75-2.00 percent, 19.8 percent probability that rates will be at 2.00-2.25 percent, 46.1 percent probability that rates will be at 2.25-2.50 percent, and 29.6 percent probability that rates will be at 2.50-2.75 percent, and 3.4 percent probability that rates will be at 2.75-3.00 percent.
- June 2019 meeting: Market is attaching 0.7 percent probability that rates will be at 1.75-2.00 percent, 12.5 percent probability that rates will be at 2.00-2.25 percent, 35.8 percent probability that rates will be at 2.25-2.50 percent, and 35.9 percent probability that rates will be at 2.50-2.75 percent, 13.6 percent probability that rates will be at 2.75-3.00 percent, 1.4 percent probability that rates will be at 3.00-3.25 percent.
The probability is suggesting,
- Since our last review a week ago, the probabilities have eased for far months.
- The market is pricing the third hike for 2018 in September and pricing it with 93.6 percent probability compared to 97.6 percent a week ago.
- The market is pricing the fourth hike of 2018 in December with 61.3 percent probability instead of 68.5 percent probability just a week ago.
- The first rate hike of 2019 is priced in June with 50.9 percent probability, instead of 59.4 percent probability just a week ago.
