Wednesday, March 23, 2016

The Probability of an April Rate Hike Just Doubled

I wonder what the Austrian-lites who thought the December Fed rate hike wouldn't hold and that the Fed would have to immediately reverse it---and then possibly go negative, think about this?

Joseph Andifoli at MarketWatch reports:
The CME’s FedWatch...used to gauge the market’s view of probability for Fed interest-rate hikes, shows that traders were pricing in a 14% chance of a hike in April on Wednesday, compared with just 7% a day ago.
The Fed will announce its next rate-hike decision at 2 p.m. Eastern Time on April 27, at the close of its next two-day policy meeting...
 To be sure, an April hike remains unlikely...
But the shift in expectations is significant because it shows that recent remarks from Fed officials have muddled market participants’ view of the central bank’s intended path for rising interest rates.

On Monday, both Atlanta Fed President Dennis Lockhart and San Francisco Fed President John Williams floated the idea of raising interest rates in April.

Neither Lockhart nor Williams are voting members this year. But St. Louis Fed President James Bullard is. And on Wednesday, he said there was a “credible” case for the Fed to hike interest rates last week.

“We didn’t do it, so now we can look at April and see what the data look like when we get to April,” Bullard said...

Even Chicago Fed President Charles Evans, a notorious dove, presented slightly more hawkish view in comments from Tuesday. Evans said he would back a “wait-and-see approach” at the Fed until there’s evidence that the recent uptick in U.S. inflation has been sustained. But noted that U.S. economic fundamentals are “quite good.”

Perhaps the most hawkish comments came from Philadelphia Fed President Patrick Harker who said the Fed should seriously consider raising rates in April.

“I think we need to get on with it,” he said.

If not April, June looks very likely for another rate hike, so much for the reversal.



  1. they wouldn't raise it in election year, would they?

  2. Can you explain to me, in Austrian terms, what it means for the probability of a one-off event to double?