May Rate Hike Expectations: 35% Bloomberg, 7.2% CME

Rate hike expectations are the widest I have ever seen. Consider Bloomberg vs CME.

On May 2, the Fed meets to set interest rate policy. Bloomberg see its this way.

Expectations for a May rate hike up to 35% (if #Fed does hike, it would certainly send clear signal to market that non-presser meetings aren’t off limits) @Bloomberg @biancoresearch pic.twitter.com/2fo7aPW4mu

— Liz Ann Sonders (@LizAnnSonders) April 30, 2018

CME Fedwatch has it like this.

Bloomberg Silliness

I believe the Bloomberg forecast is silly but there is no way to prove my assessment.

If the Fed does not hike, Bloomberg still had a 65% probability the Fed would not hike, and it will insist it got the forecast right.

Even if the Fed does hike, CME had a non-zero (7.2%) chance the Fed would hike.

If there was a way to arb the spread, it would likely pay off in spades to do so. Regardless, either CME or Bloomberg is way off on their model.

With two days to go before decision time, I strongly suggest Bloomberg is radically wrong.