Japan Services Producer Prices Rise 3.2% in June, Supporting BOJ Rate Hike Expectations 
Japan PM Sanae Takaichi Unveils Growth Plan as BOJ Independence Concerns Lift Bond Yields 
BOJ Seen Holding Rates at 1% While Keeping Inflation Risk Warning 
RBA Signals More Rate Hikes Possible as Australia Battles Stubborn Inflation 
ECB Expected to Hold Rates as Middle East Tensions Keep September Hike in Focus 
Chile Central Bank Holds Interest Rate at 4.5% as Inflation and Global Risks Persist 
Australia Inflation Cools as Core CPI Misses Forecasts, Easing RBA Rate Hike Pressure 
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 16th April)
- May 2018 meeting: Market is attaching 99.5 percent probability that rates will be at 1.50-1.75 percent, and 0.5 percent probability that rates will be at 1.75-2.00 percent.
- June 2018 meeting: Market is attaching 99.5 percent probability that rates will be at 1.75-2.00 percent, and 0.5 percent probability that rates will be at 2.00-2.25.
- August 2018 meeting: Market is attaching 93.5 percent probability that rates will be at 1.75-2.00 percent, and 6.5 percent probability that rates will be at 2.00-2.25 percent.
- September 2018 meeting: Market is attaching 29.6 percent probability that rates will be at 1.75-2.00 percent, 66 percent probability that rates will be at 2.00-2.25 percent, and 4.4 percent probability that rates will be at 2.25-2.50 percent.
- November 2018 meeting: Market is attaching 34.4 percent probability that rates will be at 1.75-2.00 percent, 61.4 percent probability that rates will be at 2.00-2.25 percent, 9.8 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 16 percent probability that rates will be at 1.75-2.00 percent, 46.3 percent probability that rates will be at 2.00-2.25 percent, 32.9 percent probability that rates will be at 2.25-2.50 percent, 4.6 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 for both near months and for far months.
- Next hike is priced in June with 99.5 percent probability, instead of 85.2 percent a week ago.
- The market brought forwarded the third hike for 2018 in September and pricing it with 70.4 percent probability compared to 51.3 percent a week ago.
- The market is pricing the fourth hike in December with 37.7 percent probability instead of 27.1 percent probability just a week ago.
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