What are those US Fed hike forecasts looking like right now?

by | October 10th, 2017, 15:36:33 | News

US Federal Reserve

These are the current US Fed hike expectations 10th october 2017

After the most recent Fed meeting in September, the probability(s) of hikes rose sharply leading markets to re-price 2018 projections and confirm that a December 2017 hike was almost certain.

Hikes as follows as per the CME Fed Watch Tool latest;

  • December 13th 2017, a fresh probability of 86.7% for a hike bringing the rate to the 1.25-1.50% range with a negligible probability of less than 5% for a range 1.50-1.75%
  • January 2018, the meeting has a probability of 11.5% for a range 1.00-1.25% (making December 2017 nailed on) and 83.6% probability for a range 1.25%-1.50%.  A 5% probability is given for a range 1.50%-1.75% holds.
  • March 2018 FOMC meeting attracts a probability of 8.3% that cash rates will be in the range of 1.00-1.25% with a probability of 63.3% that rates will be in the range 1.25-1.50%. A 27% probability of a range 1.50-1.75% and less than 2% probability for a range 1.75-2.00% cash rate.
  • May 2018, is worth noting in spite of the potential changes to the make-up of Fed members to come in 2018…… there is a 7.9% probability for rates in the range 1.00-1.25% and a 61% chance that rates will be set at between 1.25-1.50%, a 28.5% chance of a range 1.50-1.75% with 1.75-2.0% range a very slim 2.5%.  Above 2.0% is out of all probabilities at 0.1%

As stated, much depends upon changes to the Fed hierarchy and significant potential changes to the US economy and politics (with Trump`s desire for a lower USD in mind). With more than a 90% chance of a December 13th hike, it looks nailed on for now with USD not really pulling many roots up so far. We might see a long run in to December and a flurry as 1st December comes and goes.

2018 odds have definitely been upgraded significantly as a result of recent events and data.

Si Heath
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