South Korea Central Bank Signals Inflation Concerns as Oil Prices Surge 
Eurozone Recession Risks Rise as Middle East Conflict Threatens Growth, ECB Official Warns 
Japan Inflation Expectations Rise as BOJ Rate Hike Timing Faces Uncertainty 
Bank of England Set to Hold Interest Rates as Inflation Risks and Iran War Impact Loom 
BOJ Governor Kazuo Ueda Hints at Rate Hike as Inflation Pressures Build 
Fed’s Goolsbee Warns Inflation Remains Elevated, Signals Caution on Rate Cuts 
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 25th February)
- March 2019 meeting: Market is attaching 94.8 percent probability that rates will be at 2.25-2.50 percent, and 5.2 percent probability that rates will be at 2.50-2.75 percent.
- May 2019 meeting: Market is attaching 3.8 percent probability that rates will be at 2.00-2.25 percent, 91.2 percent probability that rates will be at 2.25-2.50 percent, and 5 percent probability that rates will be at 2.50-2.75 percent.
- June 2019 meeting: Market is attaching 6.8 percent probability that rates will be at 2.00-2.25 percent, 88.4 percent probability that rates will be at 2.25-2.50 percent, and 4.8 percent probability that rates will be at 2.50-2.75 percent.
- July 2019 meeting: Market is attaching 6.8 percent probability that rates will be at 2.00-2.25 percent, 88.4 percent probability that rates will be at 2.25-2.50 percent, and 4.8 percent probability that rates will be at 2.50-2.75 percent.
- September 2019 meeting: Market is attaching 6.7 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 6.8 percent probability that rates will be at 2.50-2.75 percent.
- October 2019 meeting: Market is attaching 8.8 percent probability that rates will be at 2.00-2.25 percent, 86.6 percent probability that rates will be at 2.25-2.50 percent, and 4.7 percent probability that rates will be at 2.50-2.75 percent.
- December 2019 meeting: Market is attaching 12.5 percent probability that rates will be at 2.00-2.25 percent, 83 percent probability that rates will be at 2.25-2.50 percent, and 4.5 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 somewhat eased.
- The market is pricing just one rate hike for 2019 and that with just 4.5 percent probability, compared to a 1.8 percent a week ago and 0 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 12.5 percent probability, compared to 11.6 percent a week ago, and 19.5 percent probability, a week before that.
