Following today’s FOMC announcement in which the Fed scaled back its rate hike projections from four to two, the market scaled back its assessments even more according to CME Fedwatch analysis of Fed Fund Futures.
Let’s compare rate hike odds on March 14 to today to see how the odds shifted.
June 15 Meeting Odds on March 14
“In June, the odds of a rate hike were nearly 50%. Moreover, the odds of two hikes are 8.2% vs. the odds of a cut of 1.9%. A month ago, the odds of no hike were 81.5%.”
That’s how I reported things on March 14. Let’s take a look at today.
June 15 Meeting Odds on March 16
The market no no longer expects a near 50% chance of a hike. Today the market says there is a 61.9% chance the Fed will not hike by June.
December 21 Meeting Odds on March 14
“Heading all the way out to late December, the odds of at most one hike are still a very high 64.2%. There is even a 0.9% chance of a cut. However, there are significant chances (35.7%) of multiple hikes. Of the multiple hikes, the most likely is two. The odds of two hikes by December are 25.6%.”
That’s how I reported things on March 14. Here are today’s numbers.
December 21 Meeting Odds on March 16
Looking out to June the market expects a single hike. However, the odds of no hike are 32.8% vs. a combined 25.1% chance of multiple hikes.
Did you catch the error in all of the charts?
The error was also present two days ago. On every chart, CME had the previous day possibility listed as 2.7%.
I notified the CME today and expect this to be fixed soon.
By the way, what happened to chances of a cut? I failed to ask the CME that.
This is what I said on Monday in Market Starting to Price in Hikes – Very Slowly:
“The Fed starts a two-day meeting tomorrow. Its interest rate decision comes Wednesday. Despite the talk of a hike tomorrow, the Fed would never surprise with hikes. …. On Wednesday morning, CPI, housing starts, and industrial production numbers come out. If those numbers are weak, the Fed will not be so hawkish. If the numbers are bad enough, the Fed will be anything but hawkish.”
The numbers were bad and the Fed was anything but hawkish. The Market is even less hawkish than the Fed.
I am less hawkish than the market.
Mike “Mish” Shedlock
A complete farce at this point.
It should be completely obvious to everyone that rates will never, ever get anywhere close to “normalized”. They will eventually get the inflation they (and the bankrupt governments at every level) so desperately need, but until then rates will remain pinned close to zero. This will at least allow them to avoid the embarassment of having to go nominally “negative”.
In the meantime, asset prices will go ballistic, with Gold probably leading the way as confidence in government and central banking continues to wane.
Yellen will be long gone before the Fed has the guts to raise rates in spite of a threat of a market tantrum.