Brazil Central Bank Plans $2 Billion Dollar Auctions to Support FX Liquidity 
BOJ Governor Ueda and PM Takaichi Set for Key Meeting Amid Yen Slide and Rate-Hike Debate 
RBA Signals Possible Rate Implications as Inflation Proves More Persistent 
Japan’s Inflation Edges Higher in October as BOJ Faces Growing Pressure to Hike Rates 
BOK Expected to Hold Rates at 2.50% as Housing and Currency Pressures Persist 
New RBNZ Governor Anna Breman Aims to Restore Stability After Tumultuous Years 
Kazakhstan Central Bank Holds Interest Rate at 18% as Inflation Pressures Persist 
BOJ’s Noguchi Calls for Cautious, Gradual Interest Rate Hikes to Sustain Inflation Goals 
In recent times, several Fed policymakers have either toned down their hawkish expectations or turned dovish. However, still, a majority of the policymakers are still hawkish on the hike outlook. In light of that, let’s take a look at the market pricing of hikes. The current interest rate is at 1.00-1.25 percent. (Note, all calculations are based on data as of 12th July)
- July 26th meeting: Market is attaching 97 percent probability that rates will be at 1.00-1.25 percent, and 3 percent probability that rates will be at 1.25-1.50 percent.
. - September 20th meeting: Market is attaching 86 percent probability that rates will be at 1.00-1.25 percent, 13.5 percent probability that rates will be at 1.25-1.50 percent, and 0.5 percent probability that rates will be at 1.50-1.75 percent.
- November 1st meeting: Market is attaching 85 percent probability that rates will be at 1.00-1.25 percent, 14 percent probability that rates will be at 1.25-1.50 percent, and 1 percent probability that rates will be at 1.50-1.75 percent.
- December 13th meeting: Market is attaching 43 percent probability that rates will be at 1.00-1.25 percent, 49 percent probability that rates will be at 1.25-1.50 percent, 7.5 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.
- January 2018 meeting: Market is attaching 42 percent probability that rates will be at 1.00-1.25 percent, 49 percent probability that rates will be at 1.25-1.50 percent, 8 percent probability that rates will be at 1.50-1.75 percent, and 1 percent probability that rates will be at 1.75-2.00 percent.
- March 2018 meeting: Market is attaching 31.5 percent probability that rates will be at 1.00-1.25 percent, 47 percent probability that rates will be at 1.25-1.50 percent, 19 percent probability that rates will be at 1.50-1.75 percent, and 2.5 percent probability that rates will be at 1.75-2.00 percent.
- May 2018 meeting: Market is attaching 32.4 percent probability that rates will be at 1.00-1.25 percent, 46.2 percent probability that rates will be at 1.25-1.50 percent, 18.6 percent probability that rates will be at 1.50-1.75 percent, 2.7 percent probability that rates will be at 1.75-2.00 percent, and 0.2 percent probability that rates will be at 2.00-2.25 percent.
- June 2018 meeting: Market is attaching 23.2 percent probability that rates will be at 1.00-1.25 percent, 42.2 percent probability that rates will be at 1.25-1.50 percent, 26.3 percent probability that rates will be at 1.50-1.75 percent, 7.2 percent probability that rates will be at 1.75-2.00 percent, and 1 percent probability that rates will be at 2.00-2.25 percent.
The probability is suggesting,
- Despite some of the dovish-toned remarks from the Federal Reserve officials, the Financial is currently pricing the third hike in December with 57 percent probability.
- Interestingly, the market is not pricing another hike for the first six months of 2018. In June 2 the 18, probability of a hike stands at 34.5 percent.
- We are currently expecting the third rate hike in December and the beginning of balance sheet trimming in September.
