2019 Rate "Cuts" in Play

The market still expects the Fed to hike on Wednesday, but even the 3-Month yield is lower. Let's look ahead to 2019.

December 19, 2018 Rate Hike Odds

Nearly everyone expects the Fed will hike tomorrow. So do I. If so, the policy will be 225-250 basis points (2.25 to 2.50 percentage points). Then What?

December 11, 2019 Rate Hike Probabilities

Assuming there is a hike tomorrow, a year from now the market expects the Fed will either hold pat or cut. There is only a 40.5% chance the Fed hikes next year.

For now, the market assumes a hike is far more likely than a cut, but comments tomorrow from the Fed will likely move all of these percentages.

It won't matter what the Fed says tomorrow if a recession hits in 2019, and I think it will.

Mike "Mish" Shedlock

Comments (3)
No. 1-2
Runner Dan
Runner Dan

The Fed is completely “data dependent” and does not listen to the President (I know, not saying much here), what “everyone expects them to do”, as expressed in the Rate Hike Probabilities, or even the stock market! The stock market could tank, but if the data says to raise rates, the Fed will raise rates! That’s how principled they are!

MorrisWR
MorrisWR

The Fed has been behind the Treasury rates so I expect them to raise but assuming they think Treasuries are declining, perhaps they hold off. I also expect they would like a bit more room to ease if 2019 goes downhill.