Japan’s Finance Minister Signals Alignment With BOJ as Rate Hike Speculation Grows 
RBNZ Cuts Interest Rates Again as Inflation Cools and Recovery Remains Fragile 
Fed Officials Split as Powell Weighs December Interest Rate Cut 
Japan’s Inflation Edges Higher in October as BOJ Faces Growing Pressure to Hike Rates 
Fed Rate Cut Odds Rise as December Decision Looks Increasingly Divided 
BOJ Governor Ueda Meets Key Ministers as Markets Eye Policy Shifts Under New Leadership 
FOMC followed through its promise and hiked rates four times in 2018 and forecasted two more rate hikes for 2019. Current Federal funds rate - 225-250 bps (Note, all calculations are based on data as of 7th January)
- January 2019 meeting: Market is attaching 99.5 percent probability that rates will be at 2.25-2.50 percent, and 0.5 percent probability that rates will be at 2.50-2.75 percent.
- March 2019 meeting: Market is attaching 99.5 percent probability that rates will be at 2.25-2.50 percent, and 0.5 percent probability that rates will be at 2.50-2.75 percent.
- May 2019 meeting: Market is attaching 93.5 percent probability that rates will be at 2.25-2.50 percent, and 6.5 percent probability that rates will be at 2.50-2.75 percent.
- June 2019 meeting: Market is attaching 87.3 percent probability that rates will be at 2.25-2.50 percent, and 12.8 percent probability that rates will be at 2.50-2.75 percent.
- July 2019 meeting: Market is attaching 0.9 percent probability that rates will be at 2.00-2.25 percent, 86.5 percent probability that rates will be at 2.25-2.50 percent, and 12.7 percent probability that rates will be at 2.50-2.75 percent.
- September 2019 meeting: Market is attaching 2.9 percent probability that rates will be at 2.00-2.25 percent, 84.8 percent probability that rates will be at 2.25-2.50 percent, and 12.3 percent probability that rates will be at 2.50-2.75 percent.
- October 2019 meeting: Market is attaching 6.5 percent probability that rates will be at 2.00-2.25 percent, 81.7 percent probability that rates will be at 2.25-2.50 percent, and 11.8 percent probability that rates will be at 2.50-2.75 percent.
- December 2019 meeting: Market is attaching 1 percent probability that rates will be at 1.75-2.00 percent, 16.4 percent probability that rates will be at 2.00-2.25 percent, and 72.3 percent probability that rates will be at 2.25-2.50 percent, and 10.3 percent probability that rates will be at 2.50-2.75 percent.
The probability is suggesting,
- Since our last review a week ago, the probabilities have taken a turn from dovish to hawkish.
- The market is just pricing one rate hike for 2019 with 10.3 percent probability, compared to a 3.7 percent a week ago and 8 percent in the week before that, which means that the market is pricing no rate hike in 2019, despite Fed’s forecast of two hikes.
- The market is now pricing a rate cut in 2019 with 17.4 percent probability, compared to 25.6 percent a week ago.
