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 22nd April)

• May 2019 meeting: Market is attaching 0.5 percent probability that rates will be at 2.00-2.25 percent, and 99.5 percent probability that rates will be at 2.25-2.50 percent.
   
• June 2019 meeting: Market is attaching 6.6 percent probability that rates will be at 2.00-2.25 percent, and 93.4 percent probability that rates will be at 2.25-2.50 percent.
   
• July 2019 meeting: Market is attaching 10.5 percent probability that rates will be at 2.00-2.25 percent, and 89.5 percent probability that rates will be at 2.25-2.50 percent.
   
• September 2019 meeting: Market is attaching 26.9 percent probability that rates will be at 2.00-2.25 percent, and 73.1 percent probability that rates will be at 2.25-2.50 percent.
   
• October 2019 meeting: Market is attaching 31.6 percent probability that rates will be at 2.00-2.25 percent, and 68.4 percent probability that rates will be at 2.25-2.50 percent.
   
• December 2019 meeting: Market is attaching 0.8 percent probability that rates will be at 1.50-1.75 percent, 7.9 percent probability that rates will be at 1.75-2.00 percent, 35 percent probability that rates will be at 2.00-2.25 percent, and 56.4 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 haven’t changed much.
• The market is pricing the possibility of a rate cut with 43.7 percent probability, compared to 42.7 percent last week, and 53.5 percent in the week before that.