BOJ Faces Pressure for Clarity, but Neutral Rate Estimates Likely to Stay Vague 
RBI Cuts Repo Rate to 5.25% as Inflation Cools and Growth Outlook Strengthens 
Fed Rate Cut Odds Rise as December Decision Looks Increasingly Divided 
BOJ’s Noguchi Calls for Cautious, Gradual Interest Rate Hikes to Sustain Inflation Goals 
UK Raises Deposit Protection Limit to £120,000 to Strengthen Saver Confidence 
Brazil Central Bank Plans $2 Billion Dollar Auctions to Support FX Liquidity 
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 11th February)
- March 2019 meeting: Market is attaching 98.7 percent probability that rates will be at 2.25-2.50 percent, and 1.3 percent probability that rates will be at 2.50-2.75 percent.
- May 2019 meeting: Market is attaching 96.7 percent probability that rates will be at 2.25-2.50 percent, and 3.3 percent probability that rates will be at 2.50-2.75 percent.
- June 2019 meeting: Market is attaching 96.7 percent probability that rates will be at 2.25-2.50 percent, and 3.3 percent probability that rates will be at 2.50-2.75 percent.
- July 2019 meeting: Market is attaching 96.7 percent probability that rates will be at 2.25-2.50 percent, and 3.3 percent probability that rates will be at 2.50-2.75 percent.
- September 2019 meeting: Market is 5.5 percent probability that rates will be at 2.00-2.25 percent, and 94.5 percent probability that rates will be at 2.25-2.50 percent.
- October 2019 meeting: Market is 5.5 percent probability that rates will be at 2.00-2.25 percent, and 94.5 percent probability that rates will be at 2.25-2.50 percent.
- December 2019 meeting: Market is 19.5 percent probability that rates will be at 2.00-2.25 percent, and 80.5 percent probability that rates will be at 2.25-2.50 percent.
The probability is suggesting,
- Since our last review a week ago, the probabilities have loosened, as investors brace safe-haven assets.
- The market is pricing just one rate hike for 2019 and that with just 0 percent probability, compared to a 4.1 percent a week ago and 26.2 percent in the week before that, which means that the market is far from pricing a rate hike in 2019, despite Fed’s forecast of two hikes.
- The market is now pricing a rate cut in 2019 with 19.5 percent probability, compared to 8.4 percent a week ago, and 4.1 percent probability, a week before that.
