ECB’s Cipollone Backs Digital Euro as Europe Pushes for Payment System Independence 
RBA Deputy Governor Says November Inflation Slowdown Helpful but Still Above Target 
Markets React as Tensions Rise Between White House and Federal Reserve Over Interest Rate Pressure 
BOJ Rate Decision in Focus as Yen Weakness and Inflation Shape Market Outlook 
BOJ Holds Interest Rates Steady, Upgrades Growth and Inflation Outlook for Japan 
ECB Signals Steady Interest Rates as Fed Risks Loom Over Outlook 
Jerome Powell Attends Supreme Court Hearing on Trump Effort to Fire Fed Governor, Calling It Historic 
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 2 percent probability that rates will be at 2.00-2.25 percent, and 98 percent probability that rates will be at 2.25-2.50 percent.
- June 2019 meeting: Market is attaching 20 percent probability that rates will be at 2.00-2.25 percent, and 80 percent probability that rates will be at 2.25-2.50 percent.
- July 2019 meeting: Market is attaching 2.9 percent probability that rates will be at 1.75-2.00 percent, 27.2 percent probability that rates will be at 2.00-2.25 percent, and 69.9 percent probability that rates will be at 2.25-2.50 percent.
- September 2019 meeting: Market is attaching 9.2 percent probability that rates will be at 1.75-2.00 percent, 37.1 percent probability that rates will be at 2.00-2.25 percent, and 53.7 percent probability that rates will be at 2.25-2.50 percent.
- October 2019 meeting: Market is attaching 13.2 percent probability that rates will be at 1.75-2.00 percent, 38.8 percent probability that rates will be at 2.00-2.25 percent, and 48 percent probability that rates will be at 2.25-2.50 percent.
- December 2019 meeting: Market is attaching 4.3 percent probability that rates will be at 1.50-1.75 percent, 18 percent probability that rates will be at 1.75-2.00 percent, 41 percent probability that rates will be at 2.00-2.25 percent, and 36.7 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 sharply turned dovish. However, it is less to do with the state of the U.S. economy but rather the march higher by the effective federal funds rate, which is widening against the interest rate the Fed pays on excess reserve.
- The market is pricing the possibility of a rate cut with 63.3 percent probability, compared to 43.7 percent last week, and 42.7 percent in the week before that.
