BOJ Minutes Signal More Rate Hikes as Inflation Risks Grow 
BOJ Rate Hike Expectations Rise Ahead of September Meeting 
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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 94.5 percent probability that rates will be at 2.25-2.50 percent, and 5.5 percent probability that rates will be at 2.50-2.75 percent.
- June 2019 meeting: Market is attaching 78.7 percent probability that rates will be at 2.25-2.50 percent, and 21.3 percent probability that rates will be at 2.50-2.75 percent.
- July 2019 meeting: Market is 77.1 percent probability that rates will be at 2.25-2.50 percent, and 21.5 percent probability that rates will be at 2.50-2.75 percent, and 1.3 percent probability that rates will be at 2.75-3.00 percent.
- September 2019 meeting: Market is 75.3 percent probability that rates will be at 2.25-2.50 percent, and 22.8 percent probability that rates will be at 2.50-2.75 percent, and 1.9 percent probability that rates will be at 2.75-3.00 percent.
- October 2019 meeting: Market is 75.3 percent probability that rates will be at 2.25-2.50 percent, and 22.8 percent probability that rates will be at 2.50-2.75 percent, and 1.9 percent probability that rates will be at 2.75-3.00 percent.
- December 2019 meeting: Market is attaching 4.4 percent probability that rates will be at 2.00-2.25 percent, 72.2 percent probability that rates will be at 2.25-2.50 percent, and 21.6 percent probability that rates will be at 2.50-2.75 percent, and 1.8 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 somewhat.
- The market is just pricing one rate hike for 2019 with 23.4 percent probability, compared to a 10.8 percent a week ago and 3.7 percent in the week before that, which means that the market is still pricing no rate hike in 2019, despite Fed’s forecast of two hikes.
- The market is now pricing a rate cut in 2019 with 4.4 percent probability, compared to 17.4 percent a week ago, and 25.6 percent probability, a week before that.
