Fed Hike Probabilities Review After FOMC Minutes
After last night’s FOMC minutes, which showed many policymakers were issuing warnings on appreciable global developments, which pose economic risks to United States. Moreover policymakers are worried over central bank’s ability to ease policy further if U.S. economy hits back gear again and nobody wants to backtrack on policy hikes.
While in March, FOMC members predicted two rate hikes this year market is hardly predicting just one and that not before December.
Let’s review the hike probabilities over next few meetings –
Current FED funds rate stands at 0.25-0.5%
- April, 2016 meeting – Market is attaching 97% probability that rates will remain at 0.25-0.5% and 3% probability that there would be 25 basis points hike.
- June, 2016 meeting – Market is attaching 82% probability that rates will remain at 0.25-0.5%, 17% probability that rates will be at 0.5-0.75% and 1% probability that rates will be at 0.75-1%.
- July, 2016 meeting - Market is attaching 68% probability that rates will remain at 0.25-0.5%, 28% probability that rates will be at 0.5-0.75% and 4% probability that rates will be at 0.75-1%
- September, 2016 meeting - Market is attaching 58% probability that rates will remain at 0.25-0.5%, 34% probability that rates will be at 0.5-0.75%, 7% probability that the rates will be at 0.75-1% and only 1% probability that the rates will be at 1-1.25%.
- November, 2016 meeting - Market is pricing 56% probability that rates will remain at 0.25-0.5%, 35% probability that rates will be at 0.5-0.75%, 8% probability that the rates will be at 0.75-1% and only 1% probability that the rates will be at 1-1.25%.
Hike expectations have really shifted south post-Yellen speech last week and minutes yesterday.
However there exists serious risk that FED will hike in June as the board is well divided.
Dollar index, is down since yesterday and today it is trading at 94.44, down -0.05% so far.
The material has been provided by InstaForex Company - www.instaforex.com
