Fed Says Two Hikes, Down From Four; Market Says One

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.

CME Error

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.

Very Slowly!

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.”