Fed Hike aftermath Series: Hike probabilities over coming meetings

FOMC increased interest rates in March, June and in September. Increased its forecast from three rate hikes in 2018 to four rate hikes. September decision was unanimous. Current Federal funds rate - 200-225 bps (Note, all calculations are based on data as of 15th October)

• November 2018 meeting: Market is attaching 98 percent probability that rates will be at 2.00-2.25 percent, and 2 percent probability that rates will be at 2.25-2.50 percent.
   
• December 2018 meeting: Market is attaching 20.4 percent probability that rates will be at 2.00-2.25 percent, 78.1 percent probability that rates will be at 2.25-2.50 percent, and 1.5 percent probability that rates will be at 2.50-2.75 percent.
   
• January 2019 meeting: Market is attaching 15.7 percent probability that rates will be at 2.00-2.25 percent, 75 percent probability that rates will be at 2.25-2.50 percent, and 5.7 percent probability that rates will be at 2.50-2.75 percent.
   
• March 2019 meeting: Market is attaching 6.8 percent probability that rates will be at 2.00-2.25 percent, 39 percent probability that rates will be at 2.25-2.50 percent, and 50.4 percent probability that rates will be at 2.50-2.75 percent, and 3.8 percent probability that rates will be at 2.75-3.00 percent.
   
• May 2019 meeting: Market is attaching 6.2 percent probability that rates will be at 2.00-2.25 percent, 36.1 percent probability that rates will be at 2.25-2.50 percent, and 49.4 percent probability that rates will be at 2.50-2.75 percent, and 8.3 percent probability that rates will be at 2.75-3.00 percent.
   
• June 2019 meeting: Market is attaching 3 percent probability that rates will be at 2.00-2.25 percent, 20.7 percent probability that rates will be at 2.25-2.50 percent, and 42.5 percent probability that rates will be at 2.50-2.75 percent, 29.3 percent probability that rates will be at 2.75-3.00 percent, 4.5 percent probability that rates will be at 3.00-3.25 percent.
   
• July 2019 meeting: Market is attaching 2.8 percent probability that rates will be at 2.00-2.25 percent, 19.4 percent probability that rates will be at 2.25-2.50 percent, and 41 percent probability that rates will be at 2.50-2.75 percent, 30.3 percent probability that rates will be at 2.75-3.00 percent, 6.1 percent probability that rates will be at 3.00-3.25 percent, and 0.5 percent probability that rates will be at 3.25-3.50 percent.
   
• September 2019 meeting: Market is attaching 1.9 percent probability that rates will be at 2.00-2.25 percent, 14 percent probability that rates will be at 2.25-2.50 percent, and 34 percent probability that rates will be at 2.50-2.75 percent, 33.7 percent probability that rates will be at 2.75-3.00 percent, 13.9 percent probability that rates will be at 3.00-3.25 percent, and 2.5 percent probability that rates will be at 3.25-3.50 percent.
   
• October 2019 meeting: Market is attaching 1.8 percent probability that rates will be at 2.00-2.25 percent, 13.5 percent probability that rates will be at 2.25-2.50 percent, and 33.1 percent probability that rates will be at 2.50-2.75 percent, 33.7 percent probability that rates will be at 2.75-3.00 percent, 14.7 percent probability that rates will be at 3.00-3.25 percent, and 3.1 percent probability that rates will be at 3.25-3.50 percent.
   

The probability is suggesting,

• Since our last review a week ago, the probabilities have eased for both near and far months.
• The market is pricing the fourth hike in December with 79.6 percent probability compared to 83.5 percent a week ago.
• The first rate hike of 2019 is priced in March with 54.2 percent probability, compared to 61.2 percent a week ago.
• The second hike for 2019 is now price in September with a 50.1 percent probability, compared to 60 percent a week ago.