Bank of Korea Holds Interest Rates Steady as Weak Won Limits Policy Flexibility 
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Japan’s Rising Inflation Strengthens Case for a Near-Term BOJ Rate Hike 
Fed Rate Cut Odds Rise as December Decision Looks Increasingly Divided 
Brazil Central Bank Plans $2 Billion Dollar Auctions to Support FX Liquidity 
Fed Officials Split as Powell Weighs December Interest Rate Cut 
RBNZ Cuts Interest Rates Again as Inflation Cools and Recovery Remains Fragile 
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 17th September)
- September 2018 meeting: Market is attaching 94.4 percent probability that rates will be at 2.00-2.25 percent, and 5.6 percent probability that rates will be at 2.25-2.50 percent.
- November 2018 meeting: Market is attaching 94.4 percent probability that rates will be at 2.00-2.25 percent, and 5.6 percent probability that rates will be at 2.25-2.50 percent.
- December 2018 meeting: Market is attaching 19.6 percent probability that rates will be at 2.00-2.25 percent, 75.9 percent probability that rates will be at 2.25-2.50 percent, and 4.4 percent probability that rates will be at 2.50-2.75 percent.
- January 2019 meeting: Market is attaching 17.9 percent probability that rates will be at 2.00-2.25 percent, 71.1 percent probability that rates will be at 2.25-2.50 percent, and 11 percent probability that rates will be at 2.50-2.75 percent.
- March 2019 meeting: Market is attaching 8.7 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 41.9 percent probability that rates will be at 2.50-2.75 percent, and 5.8 percent probability that rates will be at 2.75-3.00 percent.
- May 2019 meeting: Market is attaching 7.6 percent probability that rates will be at 2.00-2.25 percent, 39.5 percent probability that rates will be at 2.25-2.50 percent, and 42.1 percent probability that rates will be at 2.50-2.75 percent, and 10.8 percent probability that rates will be at 2.75-3.00 percent.
- June 2019 meeting: Market is attaching 4.1 percent probability that rates will be at 2.00-2.25 percent, 24.6 percent probability that rates will be at 2.25-2.50 percent, and 40.8 percent probability that rates will be at 2.50-2.75 percent, 25 percent probability that rates will be at 2.75-3.00 percent, 5.5 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 tightened.
- The market is pricing the third hike for 2018 in September and pricing it with 100 percent probability, higher than 98.4 percent last week ago.
- The market is pricing the fourth hike in December with 80.3 percent probability compared to 79.1 percent a week ago.
- The first rate hike of 2019 is priced in June with 71.3 percent probability, instead of 67.8 percent probability just a week ago.
