The rate hike odds for 2016 have reached a five-month high yesterday at 70 percent and all the economists surveyed by Bloomberg believe that Fed will hike once this year. However, opinions are divided over the next two meetings, small but considerable number of economists, analysts and investors believe that the Fed might surprise in November. Hike odds are at 20 percent only for November meeting.

So, how likely is the November hike?

We believe that, it shouldn’t make much of a difference for the Fed to go in November or December and yet that might make the move in December. If it takes up such a decision we don’t think it would be from the economic point of view, instead the Fed is likely to wait for the election to pass by. If a surprise from the Fed in November, do stir up the financial market, it could be detrimental for the election outcome. So, it is more likely that the Fed would wait out the election and maintain its tradition of no hike in the election year, prior to the Election Day. The Election Day (8th November) and the FOMC (2nd November) are in too close proximity.

Previously we assessed the plausibility of a rate hike by policymakers’ actions in the discount rate meeting. In August 8 members voted for a hike in the discount rate but only three voted in favor of a hike in the Federal funds rate in the September meeting. In the October discount rate meeting, nine of the 17 Federal Reserve board members voted in favor of a hike, which shows that the board is still too dovish to ensure a hike in November. We believe that the Fed is likely to take actions in December than in November.