Japan PM Sanae Takaichi Unveils Growth Plan as BOJ Independence Concerns Lift Bond Yields 
ECB Expected to Hold Rates as Middle East Tensions Keep September Hike in Focus 
BOJ Seen Holding Rates at 1% While Keeping Inflation Risk Warning 
Brazil Cuts Selic Rate to 14% as Inflation Eases but Risks Persist 
Australia Inflation Cools as Core CPI Misses Forecasts, Easing RBA Rate Hike Pressure 
Japan Economy Minister Downplays Inflation Risks Despite BOJ Warning 
South Korea Raises Interest Rates to 2.75% as Inflation and Weak Won Drive Tightening 
FOMC increased interest rates again in March and maintained its forecast for three rate hikes in 2018. FOMC also forecasted a faster pace of hikes next year than previously forecasted. March decision was unanimous. Current Federal funds rate - 150-175 bps (Note, all calculations are based on data as of 26th March)
- May 2018 meeting: Market is attaching 97.9 percent probability that rates will be at 1.50-1.75 percent, and 2.1 percent probability that rates will be at 1.75-2.00 percent.
- June 2018 meeting: Market is attaching 14.7 percent probability that rates will be at 1.50-1.75 percent, 83.6 percent probability that rates will be at 1.75-2.00 percent, and 1.8 percent probability that rates will be at 2.00-2.25.
- August 2018 meeting: Market is attaching 14 percent probability that rates will be at 1.50-1.75 percent, 80.1 percent probability that rates will be at 1.75-2.00 percent, 5.8 percent probability that rates will be at 2.00-2.25 percent, and 0.1 percent probability that rates will be at 2.25-2.50 percent.
- September 2018 meeting: Market is attaching 4.7 percent probability that rates will be at 1.50-1.75 percent, 36.4 percent probability that rates will be at 1.75-2.00 percent, 54.9 percent probability that rates will be at 2.00-2.25 percent, 3.9 percent probability that rates will be at 2.25-2.50 percent, and 0.1 percent probability that rates will be at 2.50-2.75 percent.
- November 2018 meeting: Market is attaching 4.4 percent probability that rates will be at 1.50-1.75 percent, 34 percent probability that rates will be at 1.75-2.00 percent, 53.4 percent probability that rates will be at 2.00-2.25 percent, 7.9 percent probability that rates will be at 2.25-2.50 percent, and 0.4 percent probability that rates will be at 2.50-2.75 percent.
- December 2018 meeting: Market is attaching 2.4 percent probability that rates will be at 1.50-1.75 percent, 20.7 percent probability that rates will be at 1.75-2.00 percent, 44.7 percent probability that rates will be at 2.00-2.25 percent, 28.3 percent probability that rates will be at 2.25-2.50 percent, 3.7 percent probability that rates will be at 2.50-2.75 percent, and 0.2 percent probability that rates will be at 2.75-3.00 percent.
The probability is suggesting,
- Since our last review a week ago, the probability tightened in favor of rate hikes.
- Next hike is priced in June with 85.3 percent probability, instead of 77 percent a week ago.
- The market brought forwarded the third hike for 2018 in September and pricing it with 58.9 percent probability compared to 55.9 percent a week ago.
- The market is pricing the fourth hike in December with 32.2 percent probability instead of 26.9 percent probability just a week ago.
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