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 4.5 percent probability that rates will be at 2.00-2.25 percent, and 95.5 percent probability that rates will be at 2.25-2.50 percent.
   
• June 2019 meeting: Market is attaching 14.1 percent probability that rates will be at 2.00-2.25 percent, and 85.9 percent probability that rates will be at 2.25-2.50 percent.
   
• July 2019 meeting: Market is attaching 34.3 percent probability that rates will be at 2.00-2.25 percent, and 65.7 percent probability that rates will be at 2.25-2.50 percent.
   
• September 2019 meeting: Market is attaching 36.1 percent probability that rates will be at 2.00-2.25 percent, and 63.9 percent probability that rates will be at 2.25-2.50 percent.
   
• October 2019 meeting: Market is attaching 41.6 percent probability that rates will be at 2.00-2.25 percent, and 58.4 percent probability that rates will be at 2.25-2.50 percent.
   
• December 2019 meeting: Market is attaching 2.1 percent probability that rates will be at 1.50-1.75 percent, 12.4 percent probability that rates will be at 1.75-2.00 percent, 39.1 percent probability that rates will be at 2.00-2.25 percent, and 46.5 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 somewhat tightened but still very dovish.
• The market is pricing the possibility of a rate cut with 53.5 percent probability, compared to 58 percent last week, and 54.6 percent in the week before that.