Is A Fed “No Hike” Already Priced In?

So far, there was a divide between economists and pricing in markets: while markets reflected a chance of between 20% and 30% for a rate hike, various surveys of economists have shown a majority for a rate hike in the September 17th meeting.

But now, economists seem to be getting cold feet and only a minority supports a move. So, are markets now seeing no move from the Fed? Will a hike be a huge surprise?

According to the latest poll by Reuters, 45/80 economists see no change. That’s a clear majority of 56%. This is still lower than pricing, which shows 77% against a move, but both measures certainly point to the same direction.

Needless to say, the markets will not only move by the initial breaking news about the interest rate, but will certainly watch out for the forecasts that are released at the same time, and especially the dot plot. There is a difference between a hike with a promise to hold still and a hike with a potential for another one. The same goes for a no-hike: a potential to raise rates still in 2015 is different than closing the door for the year. And later on, we will hear from Janet Yellen, and this is critical as well. Here are our 4 detailed scenarios.

Nevertheless, the initial decision given the recent expectations imply:

On a no-hike, the dollar will only slightly slide, as this is mostly priced in.

On a hike, the dollar will rally hard, as this is on priced in.

What do you think?