Fed Hike aftermath Series: Hike probabilities over coming meetings

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 1st April)

• May 2019 meeting: Market is attaching 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.
   
• June 2019 meeting: Market is attaching 15 percent probability that rates will be at 2.00-2.25 percent, and 85 percent probability that rates will be at 2.25-2.50 percent.
   
• July 2019 meeting: Market is attaching 21.9 percent probability that rates will be at 2.00-2.25 percent, and 78.1 percent probability that rates will be at 2.25-2.50 percent.
   
• September 2019 meeting: Market is attaching 40 percent probability that rates will be at 2.00-2.25 percent, and 60 percent probability that rates will be at 2.25-2.50 percent.
   
• October 2019 meeting: Market is attaching 45.1 percent probability that rates will be at 2.00-2.25 percent, and 54.9 percent probability that rates will be at 2.25-2.50 percent.
   
• December 2019 meeting: Market is attaching 2.9 percent probability that rates will be at 1.50-1.75 percent, 14.8 percent probability that rates will be at 1.75-2.00 percent, 40.3 percent probability that rates will be at 2.00-2.25 percent, and 42 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 eased further while the Federal Reserve forecasted no further rate hike in 2019.
• However, the market is pricing the possibility of a rate cut with 58 percent probability, compared to 54.6 percent last week, and 26.4 percent in the week before that.